(Exact ~~Name~~-name of ~~Registrant~~-registrant as ~~Specified~~-specified in its ~~Charter)~~-charter)

~~1875 South Grant Street Suite 750~~6500 River Place Boulevard, Bldg. 7, S#250,

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐☒ No ☒☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~June 1, 2019,~~October 29, 2021, the registrant had ~~20,326,944~~16,066,421 shares of common stock, $0.001 par value per share, issued and outstanding.

	March 31, 2019			December 31, 2018			September 30, 2021			December 31, 2020
Assets
Cash and cash equivalents	$	9,852		$	13,049		$	10,187		$	22,141
Accounts receivable, net		7,501			18,877			2,798			4,152
Non-trade receivable								2,845			453
Inventory		29,063			21,831			9,906			11,344
Prepaid expenses and other current assets		12,363			10,111			6,863			7,481
Total current assets		58,779			63,868			32,599			45,571
Property and equipment, net		1,009			1,071			570			843
Other assets		2,155			2,406			5,023			3,898
Total assets	$	61,943		$	67,345		$	38,192		$	50,312
Liabilities and stockholders’ equity
Current portion of long-term debt	$	282		$	301		$	177		$	177
Accounts payable		27,028			27,295			12,563			8,856
Accrued expenses		16,063			16,381			10,154			9,906
Warranty liability								1,296			1,530
Deferred revenue		3,950			4,223			—			5
Total current liabilities		47,323			48,200			24,190			20,474
Income tax payable		901			807			1,283			1,243
Long-term debt, less current portion		13,104			13,209			74			185
Total liabilities		61,328			62,216			25,547			21,902
Commitments and contingencies (Note 11)
Stockholders' equity
Common stock, $0.001 par value per share; 100,000,000 shares authorized: and 15,873,705 and 15,591,357 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively.		16			15
Common stock, $0.001 par value per share; 100,000,000 shares authorized: and 9,253,238 and 6,631,039 shares issued and outstanding at September 30, 2021, and December 31, 2020, respectively.*								9			7
Preferred stock, $0.001 par value per share, 5,000,000 shares authorized, and 0 shares issued and outstanding at September 30, 2021, and December 31, 2020, respectively.								—			—
Additional paid-in capital		150,332			148,641			235,719			224,581
Accumulated deficit		(149,733	)		(143,527	)		(223,083	)		(196,178	)
Total stockholders’ equity		615			5,129			12,645			28,410
Total liabilities and stockholders’ equity	$	61,943		$	67,345		$	38,192		$	50,312

The accompanying notes are an integral part of these condensed consolidated financial statements.

* Reflects the 1-for-10 reverse stock split that became effective on September 15, 2021. Refer to Note 1 – The Company and its Significant Accounting Policies for further information.

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
Net revenues	$	14,445		$	14,393		$	38,639		$	48,157
Cost of revenues		12,661			9,994			31,738			36,675
Gross profit		1,784			4,399			6,901			11,482
Operating expenses:
Research and development		5,492			3,389			13,826			10,581
Sales and marketing		3,087			2,884			7,456			8,611
General and administrative		2,961			2,477			7,602			7,644
Legal		967			1,768			4,276			5,359
Restructuring costs		—			—			—			1,087
Total operating expenses		12,507			10,518			33,160			33,282
Loss from operations		(10,723	)		(6119	)		(26,259	)		(21,800	)
Interest expense		—			(182	)		—			(803	)
Other expense, net		(126	)		(13	)		(419	)		(408	)
Loss before income taxes		(10,849	)		(6,314	)		(26,678	)		(23,011	)
Income tax expense		(90	)		(150	)		(227	)		(513	)
Net loss	$	(10,939	)	$	(6,464	)	$	(26,905	)	$	(23,524	)
Net loss per share, basic and diluted*	$	(1.31	)	$	(0.98	)	$	(3.72	)	$	(5.96	)
Weighted–average shares used in computing net loss per Share, basic and diluted*		8,366,283			6,593,764			7,222,541			3,949,415

The accompanying notes are an integral part of these condensed consolidated financial statements.

* Reflects the 1-for-10 reverse stock split that became effective on September 15, 2021. Refer to Note 1 – The Company and its Significant Accounting Policies for further information.

THREE AND NINE MONTHS ENDED ~~MARCH 31, 2019~~SEPTEMBER 30, 2021, AND ~~2018~~ 2020 (UNAUDITED)

2019

2018

Net revenues

$
26,484

$
18,190

Cost of revenues

17,105

12,927

Gross profit

9,379

5,263

Operating expenses:

Research and development

8,401

5,141

Sales and marketing

3,726

2,543

General and administrative

2,476

1,593

Total operating expenses

14,603

9,277

Loss from operations

(5,224
)

(4,014
)
Interest expense

(422
)

(406
)
Other expense, net

(265
)

(117
)
Loss before income taxes

(5,911
)

(4,537
)
Income tax expense

(295
)

(534
)
Net loss

(6,206
)

(5,071
)
Cumulative dividends on Series A, Series A-1 and Series A-2 preferred shares

—

(2,967
)
Net loss attributable to common stockholders

$
(6,206
)

$
(8,038
)
Net loss per share attributable to common stockholders, basic and diluted

$
(0.39
)

$
(7.77
)
Weighted–average shares used in computing net loss per share attributable to common
stockholders, basic and diluted

15,783,744

1,034,641

	Common stock*				Additional Paid-in		Accumulated			Total Stockholders’
For the Three Months Ended September 30, 2021	Shares		Amount		Capital		Deficit			Equity
Balance at July 1, 2021		6,695,272	$	7	$	225,099	$	(212,144	)	$	12,962
Issuance of common stock, net of issuance costs		2,555,788	2			10,335	—				10,337
Net settlement of common stock upon release of RSU		2,149	—			—	—			—
Employee and nonemployee stock-based compensation	—		—			285	—				285
Common stock variance, reverse stock split	29		—			—	—				—
Net loss	—		—		—			(10,939	)		(10,939	)
Balance at September 30, 2021		9,253,238	$	9	$	235,719	$	(223,083	)	$	12,645

The accompanying notes are an integral part of these condensed consolidated financial statements.

* Reflects the 1-for-10 reverse stock split that became effective on September 15, 2021. Refer to Note 1 – The Company and its Significant Accounting Policies for further information.

CONDENSED CONSOLIDATED ~~STATEMENTS~~STATEMENT OF ~~CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)~~

Series A convertible

Series A-1 convertible

Series A-2 convertible

Series B convertible

Additional

Total

preferred stock

preferred stock

preferred stock

preferred stock

Common stock

paid-in

Accumulated

stockholders'

Shares

Amount

Shares

Amount

Shares

Amount

Shares

Amount

Shares

Amount

capital

deficit

equity (deficit)

Balance at January 1, 2019

—

—

—

—

—

—

—

—

15,591,357

$
15

$
148,641

$
(143,527
)

$
5,129

Issuance of common stock, net of issuance costs

—

—

—

—

—

—

—

—

227,628

1

1,603

—

1,604

Issuance of common stock upon
   exercise of stock options

—

—

—

—

—

—

—

—

54,720

—

41

—

41

Employee and nonemployee stock-based
   compensation

—

—

—

—

—

—

—

—

—

—

47

—

47

Net loss

—

—

—

—

—

—

—

—

—

—

—

(6,206
)

(6,206
)
Balance at March 31, 2019

—

—

—

—

—

—

—

—

15,873,705

$
16

$
150,332

$
(149,733
)

$
615

Balance at January 1, 2018

7,471,765

$
44,564

1,586,024

$
4,487

1,183,703

$
9,733

1,665,291

$
21,613

1,027,113

$
1

$
54,892

$
(144,804
)

$
(89,911
)
Issuance of common stock upon
   exercise of stock options

—

—

—

—

—

—

—

—

8,457

—

11

—

11

Employee and nonemployee stock-based
   compensation

—

—

—

—

—

—

—

—

—

—

33

—

33

Net loss

(5,071
)

(5,071
)
Balance at March 31, 2018

7,471,765

$
44,564

1,586,024

$
4,487

1,183,703

$
9,733

1,665,291

$
21,613

1,035,570

$
1

$
54,936

$
(149,875
)

$
(94,938
)

	Nine Months Ended
	September 30,
	2021				2020
Cash flows from operating activities:
Net loss	$	(26,905	)	$		(23,524	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		1,631				2,321
Stock-based compensation		760				770
Inventory write-downs		—				407
Non-cash interest expense		—				335
Accretion of debt discount		—				159
Loss on disposal of asset		59				—
Deferred income taxes		(9	)			(1	)
Bad debt expense		685				289
Changes in operating assets and liabilities:
Accounts receivable		669				4,897
Non-trade receivable		(2,392	)			(619	)
Inventory		1,438				6,296
Prepaid expenses and other current assets		589				44
Other assets		(1,134	)			134
Accounts payable		3,648				3,210
Accrued expenses		248				4,399
Warranty liability		(234	)			(235	)
Deferred revenue		(5	)			(1	)
Income tax payable		40				174
Net cash used in operating activities:		(20,912	)			(710	)
Cash flows from investing activities:
Purchase of property and equipment		(20	)			(203	)
Net cash used in investing activities		(20	)			(203	)
Cash flows from financing activities:
Repayment on long-term debt		(111	)			(4,109	)
Proceeds from PPP Loan		—				2,289
Repayment of PPP Loan		—				(2,289	)
Proceeds from issuance of common stock, net of costs		9,046				25,056
Taxes paid on net issuance of restricted stock units		—				(6	)
Proceeds from ESPP purchase of stock		38				42
Proceeds from exercise of stock options		5				304
Net cash provided by financing activities		8,978				21,287
Net increase (decrease) in cash and cash equivalents		(11,954	)			20,374
Cash and cash equivalents at beginning of period		22,141				11,298
Cash and cash equivalents at end of period	$	10,187		$		31,672
Supplemental disclosure of cash flow information:
Cash paid for interest	$	—		$		260
Cash paid for income taxes		45				76
Non-cash investing and financing activities:
Issuance of common stock included in other assets		1,291				—
Other assets included in accounts payable		—				108
Settlement of long-term debt with issuance of common stock		—				6,170

The accompanying notes are an integral part of these condensed consolidated financial statements.

2019

2018

Cash flows from operating activities:

Net loss

$
(6,206
)

$
(5,071
)
Adjustments to reconcile net loss to net cash used in
operating activities:

Depreciation and amortization

534

467

Stock-based compensation

47

33

Trade-in guarantee

(268
)

—

Noncash interest expense

—

228

Deferred income taxes

(11
)

(14
)
Provision for doubtful accounts

(3
)

(41
)
Changes in operating assets and liabilities:

Accounts receivable

11,379

(2,887
)
Inventory

(7,233
)

(2,802
)
Prepaid expenses and other current assets

(2,252
)

(2,533
)
Other assets

(19
)

(16
)
Accounts payable

(268
)

7,730

Accrued expenses

(319
)

475

Deferred revenue

(3
)

(370
)
Income tax payable

94

121

Net cash used in operating activities

(4,528
)

(4,680
)
Cash flows from investing activities:

Purchase of property and equipment

(82
)

(69
)
Development of tooling and purchased software licenses

(109
)

(841
)
Net cash used in investing activities

(191
)

(910
)
Cash flows from financing activities:

Proceeds from borrowings on long-term debt

—

3,000

Proceeds on line of credit

—

17,510

Repayment on line of credit

(123
)

(15,738
)
Proceeds from issuance of common stock, net of costs

1,604

—

Cost associated with amendments to credit agreements

—

18

Proceeds from exercise of stock options

41

11

Net cash provided by financing activities

1,522

4,801

Net decrease in cash and cash equivalents

(3,197
)

(789
)
Cash and cash equivalents at beginning of period

13,049

1,581

Cash and cash equivalents at end of period

$
9,852

$
792

Supplemental disclosure of cash flow information:

Cash paid for interest

$
358

$
113

Cash paid for income taxes

84

29

Non-cash investing and financing activities:

Other assets included in accounts payable

4

238

~~The accompanying notes are an integral part of these condensed consolidated financial statements~~.

(In thousands of U.S. dollars except share and per share amounts or as otherwise disclosed)

The condensed consolidated financial statements include the accounts of Sonim Technologies, Inc. ~~was incorporated~~and its wholly owned subsidiaries (collectively “Sonim” or the “Company”). Intercompany accounts and transactions have been eliminated. In the opinion of the Company’s management, the condensed consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. The preparation of these condensed consolidated financial statements and accompanying notes in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ materially from those estimates. Certain prior period amounts in the ~~state~~condensed consolidated financial statements and accompanying notes have been reclassified to conform to the current period’s presentation. These condensed consolidated financial statements and accompanying notes should be read in conjunction with the Company’s annual consolidated financial statements and accompanying notes included in its Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Form 10-K”).

On September 15, 2021, the Company effected a 1-for-10 stock split (the “Reverse Stock Split”) of ~~Delaware~~its issued and outstanding shares of common stock on ~~August 5, 1999~~that date. Additionally, the number of shares of the Company’s common stock subject to outstanding stock options and restricted stock units, the exercise price of all of its outstanding stock options, and the number of shares of common stock reserved for future issuance pursuant to its equity compensation plans were adjusted proportionately in connection with the Reverse Stock Split. The number of authorized shares of common stock under the Company’s Amended and Restated Certificate of Incorporation and the par value per share of its common stock were unchanged. All historical share and per share amounts presented herein have been adjusted retrospectively to reflect these changes.

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared assuming the Company will continue as a going concern and in accordance with GAAP.

Pursuant to the requirements of the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 205-40, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, management must evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year from the date these condensed consolidated financial statements are issued. This evaluation does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented or are not within control of the Company as of the date the condensed consolidated financial statements are issued. When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the Company’s ability to continue as a going concern. The mitigating effect of management’s plans, however, is ~~headquartered in San Mateo, California.~~ only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued.

The Company ishad cash and cash equivalents of $10,187 and an accumulated deficit of $223,083 at September 30, 2021, and a ~~leading U.S. provider~~net loss of $10,939 for the quarter ended September 30, 2021. Since inception, the Company has been developing ultra-rugged mobile phones and accessories designed specifically for task workers physically engaged in their work environments, often in mission-critical roles.

~~Financial Statement Presentation~~—The ~~accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (“ U.S. GAAP”)~~Company’s ability to continue as a going concern is dependent on its ability to complete ongoing and ~~pursuant to the rules and regulations~~future development of the Securities and Exchange Commission (the “SEC”) for interim financial information. The unaudited interim condensed consolidated financial statements, which reflect all adjustments (consisting of normal recurring items or items discussed herein) that management believes necessary to fairly state results of interim operations, should be read in conjunction with the Notes to Consolidated Financial Statements (including the Significant Accounting Policies and Recent Accounting Pronouncements) included in the Company’s audited consolidated financial statements for the year ended December 31, 2018, as filed with the SEC on Form S-1 (the “2018 Report”). Results of operations for interim periods are not necessarily indicative of annual results of operations. The unaudited condensed consolidated balance sheet at December 31, 2018 was extracted from the audited annual consolidated financial statements and does not include all disclosures required by GAAP for annual financial statements.

~~Principles of Consolidation~~ ~~— The accompanying condensed consolidated financial statements include the accounts of Sonim Technologies. Inc. and~~ its wholly-owned foreign subsidiaries, Sonim Technologies Spain SL, Sonim Technologies India Private Limited, Sonim Technologies (Shenzhen) Limited, Sonim Technologies (Hong Kong) Limited, and Sonim Communications India Private Limited (collectively, the “Company”). All significant intercompany transactions and balances have been eliminated in consolidation.

~~Estimates~~ —The preparation of condensed consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. These estimates include, but are not limited to, estimates related to revenue recognition; valuation assumptions regarding the determination of the fair value of common stock, as well as stock warrants; the useful lives of our long-lived assets; product warranties; loss contingencies; and the recognition and measurement of income tax assets and liabilities, including uncertain tax positions; The Company bases its estimates on historical experience and on various other assumptions that the Company believes to be reasonable under the circumstances. Actual results could differ from those estimates.

~~Significant accounting policies~~ — ~~There have been no material changes in the accounting policies from those disclosed in the audited 2018 consolidated financial statements and the related notes included in the filed Form S-1.~~

~~Revenue Recognition~~ —~~We recognize revenues primarily from the sale of products. We also enter into multiple-element agreements that include a combination of products and NRE services.~~

~~Revenues from the sale of our~~ultra-rugged mobile phones and accessories, continue commercial scale production and sell its products. The Company believes that its current level of cash and cash equivalents are not sufficient to fund commercial scale production and product sales. These conditions raise substantial doubt regarding the Company’s ability to continue as a going concern for a period of at least one year from the date of issuance of these unaudited condensed consolidated financial statements.

To alleviate these conditions, management is ~~recognized when all~~currently evaluating various funding alternatives and may seek to raise additional funds through the issuance of equity, mezzanine or debt securities, through arrangements with strategic or investment partners with greater resources or access to funds or through obtaining credit from government or financial institutions. As the ~~following conditions are met per Accounting Standards Codification, or ASC, Topic 605, Revenue Recognition, or ASC 605: (i)~~Company seeks additional sources of financing, there ~~is persuasive evidence of an arrangement; (ii) the product has been delivered~~can be no assurance that such financing would be available to the ~~customer; (iii)~~Company on favorable terms or at all. The Company’s ability to obtain additional financing in the ~~collection of~~debt and equity capital markets is subject to several factors, including market and economic conditions, the ~~fees is reasonably assured;~~Company’s performance and ~~(iv) the amount of fees~~investor sentiment with respect to be paid by the customer is fixed or determinable. Terms of product sales are generally FOB destination. Revenue recognition also incorporates allowances for discounts, price protection, returns and customer incentives that can be reasonably estimated.

Terms of product sales are generally FOB destination. Revenue recognition also incorporates allowances for discounts, price protection, returns and customer incentives that can be reasonably estimated. In addition to cooperative marketing and other incentive programs, the Company ~~has arrangements with some distributors, which allow for price protection~~ and limited rights of return, generally through stock rotation programs. Under the price protection programs, the Company gives distributors credits for the difference between the original price paid and the Company’s then current price. Under the stock rotation programs, certain distributors are able to exchange certain products based on the number of qualified purchases made during the period. The Company monitors and tracks these programs and records a provision, at the time of the sale, for future payments or credits granted as reductions of revenue based on historical experience. Recorded revenues are reduced by these allowances.its industry.

(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)

When revenue arrangements involve multiple elements, each element, referred to as a deliverable, is evaluated to determine whether it represents a separate unit of accounting in accordance with ASC 605-25, ~~Revenue Recognition – Multiple-Element Arrangements.~~ We perform this evaluation at the inception of an arrangement and as each item is delivered in the arrangement. Generally, we account for a deliverable separately if the delivered item has stand-alone value to the customer and delivery or performance of the undelivered item or service is probable and substantially in our control. When multiple elements can be separated into separate units of accounting, arrangement consideration is allocated at the inception of the arrangement, based on each unit’s relative selling price, and recognized based on the method most appropriate for that unit. When an arrangement includes NRE services which involve significant production, modification or customization of the product ~~software that is essential to the functionality of the hardware, revenues are recognized according to the milestone method in accordance with the provisions of ASC Topic 605-35,~~ ~~Construction-Type and Production- Type Contract. Under this method, we recognize revenues from milestone payments when: (i) the milestone event is substantive and its achievability was not reasonably assured at the inception of the agreement,~~and (i) we do not have ongoing performance requirements related to the achievement of the milestone earned. Milestone payments are considered substantive if all of the following conditions are met: the milestone payment (i) is commensurate with either our performance to achieve the milestone or the enhancement of the value of the delivered item or items as a result of a specific outcome resulting from our performance to achieve the milestone, (ii) relates solely to past performance, and (iii) is reasonable relative to all of the deliverables ~~and~~ ~~payment terms (including~~ other potential milestone consideration) within the arrangement. If a milestone is deemed non-substantive, we defer, if applicable, and recognize such non-substantive milestones over the estimated period of performance applicable to each agreement on a straight-line basis, as~~appropriate.~~

~~Reverse Stock Split~~ —In November 2018, the Company’s stockholders approved a one-for-fifteen reverse stock split of its common and convertible preferred stock which was effected on November 2, 2018. The par value of the common stock and convertible preferred stock were not adjusted as a result of the reverse stock split. Accordingly, all share and per share amounts for the period presented in the consolidated financial statements and notes thereto have been adjusted retrospectively to reflect this reverse stock split.

~~Deferred Offering Costs~~ —On May 9, 2019, our registration statement on Form S-1 (File No. 333-230887) related to our initial public offering (“IPO”) was declared effective by the SEC, and our common stock began trading on The Nasdaq Stock Market LLC (“Nasdaq”) on May 10, 2019. Our IPO closed on May 14, 2019. Deferred offering costs, which consist of direct incremental legal, consulting, banking and accounting fees relating to the Company’s IPO, are capitalized and will be offset against proceeds from the IPO within stockholders’ equity. As of December 31, 2018, there was $63 of deferred offering costs within other non-current assets on the condensed consolidated balance sheets. During the three months ended March 31, 2019, an additional $1,709 in deferred offering costs were incurred. In connection with the IPO, as of March 31, 2019, all deferred offering costs were charged to prepaid expenses.

The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s consolidated financial statements with another public company, which is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period, difficult or impossible because of the potential differences in accounting standards used.

(In ~~thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)~~

~~In July 2017, the Financial Accounting Standards Board (“FASB”)~~December 2019, FASB issued Accounting Standards Update ~~(“ASU”) 2017-11,~~ ~~Earnings Per Share~~(ASU) No. 2019-12, Income Taxes (Topic ~~260), Distinguishing Liabilities from Equity (Topic 480) and Derivatives and Hedging (Topic 815)~~740): I.Simplifying the Accounting for ~~Certain Financial Instruments with Down Round Features; II. Replacement of~~Income Taxes (ASU 2019-12), which simplifies the ~~Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Non-Controlling Interests with a Scope Exception.~~ ~~Part I of this update addresses the complexity of~~ accounting for income taxes by removing certain ~~financial instruments with down round features. Down round features are features~~exceptions to the general principles of ~~certain equity-linked instruments (or embedded features) that result~~ASC 740 in ~~the strike price being reduced on the basis of the pricing of future equity offerings. Current accounting guidance creates~~order to reduce cost and complexity of its application. The ASU removes the exception related to the incremental approach for ~~entities that issue financial instruments (such~~intra-period tax allocation, as ~~warrants~~well as two exceptions related to account for outside basis differences of equity method investments and convertible instruments) with down round features that require fair value measurement of the entire instrument or conversion option. Part II of this update addresses the difficulty of navigating Topic 480, ~~Distinguishing Liabilities from Equity, because of the existence of extensive pending content in the FASB Accounting Standards Codification.~~foreign subsidiaries. This pending content is the result of the indefinite deferral of accounting requirements about mandatorily redeemable financial instruments of certain nonpublic entities and certain mandatorily redeemable noncontrolling interests. The amendments in Part II of this update do not have an accounting effect. This ASUguidance is effective for fiscal years ~~and interim periods within those years,~~ beginning after December ~~15, 2018.~~31, 2021, with early adoption permitted. The Company adopted ASU 2019-12 on January 1, 2021. The adoption of ASU ~~2017-11~~2019-12 did not have an impact on the Company’s condensed consolidated financial ~~statements for either period presented.~~statements.

~~In August 2018, the FASB issued ASU 2018-13,~~ ~~Fair Value Measurement (Topic 820)~~—Changes to the Disclosure Requirements for Fair Value Measurement. The ASU eliminates certain disclosure requirements for fair value measurements for all entities and modifies some disclosure requirements. This ASU is effective for nonpublic entities beginning after December 15, 2019, with early adoption permitted. The Company is currently evaluating this new standard and the impact it will have on its existing accounting policies or presentation of the consolidated financial statements.

~~In June 2018, the FASB issued ASU 2018-07,~~ ~~Compensation—Stock Compensation (Topic 718)~~. This ASU simplifies the accounting for share-based payments granted to nonemployees for goods and services. Under the ASU, most of the guidance on such payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. This ASU is effective for nonpublic business entities for annual reporting periods beginning after December 15, 2019, with early adoption permitted. The Company is currently evaluating this new standard and the impact it will have on its existing accounting policies or presentation of the consolidated financial statements.

~~In October 2016, the FASB issued ASU 2016-16, Income Taxes—Intra-Entity Transfers of Assets Other Than Inventory~~. ASU 2016-16 requires entities to recognize income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The amendments in ASU 2016-16 are effective for annual reporting periods beginning after December 15, 2018 and requires a modified retrospective method of adoption. Early adoption is permitted. The Company is in the process of determining the potential effects of this ASU on its consolidated financial statements.

~~In August 2016, the FASB issued ASU 2016-15,~~ ~~Statement of Cash Flows (Topic 230)~~ - Classification of Certain Cash Receipts and Cash Payments, which clarifies eight specific cash flow issues in an effort to reduce diversity in practice in how certain transactions are classified within the statement of cash flows. This ASU is effective for nonpublic business entities beginning after December 15, 2019 with early adoption permitted. The Company is currently evaluating this new standard and the impact it will have on its existing accounting policies or presentation of the consolidated statement of cash flows.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), as amended, which requires lessees to recognize a liability associated with obligations to make payments under the terms of the arrangement in addition to a right-of-use asset representing the lessee’s right to use, or to control the use of the given asset assumed under the lease. ~~The~~As an emerging growth company, the Company has elected to adopt the standard ~~will be effective for~~based on nonpublic business entities implementation dates for annual reporting periods beginning after December 15, ~~2019.~~2021. The Company is currently evaluating ~~these~~this new ~~standards~~standard and the impact ~~they~~it will have on its condensed consolidated financial statements, information technology systems, process, and internal controls.

~~In January 2016, the FASB issued ASU 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which affect various aspects of~~NOTE 2 —Revenue recognition measurement, presentation and disclosure of financial instruments. The amendment is effective for nonpublic business entities for annual periods beginning after December 15, 2018. Early application of certain provisions is permitted.

The Company recognizes revenue primarily from the sale of products, including its mobile phones, barcode scanners and accessories, and the majority of the Company’s contracts include only one performance obligation, namely the delivery of product. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is defined as the unit of account for revenue recognition under ASC 606, Revenue from Contracts with Customers. The Company also recognizes revenue from other contracts that may include a combination of products and non-recurring engineering (NRE) services or from the provision of solely NRE services. Where there is a combination of products and NRE services, the Company accounts for the promises as individual performance obligations if they are concluded as distinct. Performance obligations are considered distinct if they are both capable of being distinct and distinct within the context of the contract. In determining whether performance obligations meet the criteria for being distinct, the Company considers a number of factors, such as the degree of interrelation and interdependence between obligations, and whether or not the good or service significantly modifies or transforms another good or service in the ~~process~~contract. During the three and nine months ended September 30, 2021, and 2020, the Company did not have any contracts in which the products and NRE services were concluded to be a single performance obligation. In certain cases, the Company may offer tiered pricing based on volumes purchased for specific products. To date, all tiered pricing provisions have fallen into observable ranges of ~~determining~~pricing to existing customers, thus, not resulting in any material right which could be concluded as its own performance obligation. In addition, the ~~potential effects~~Company does not offer material post-contract support services to its customers.

Net revenue for an individual contract is recognized at the related transaction price, which is the amount the Company expects to be entitled to in exchange for transferring the goods and/or services. The transaction price for product sales is calculated as the product selling price, net of ~~this ASU~~variable consideration, which may include estimates for marketing development funds, sales incentives, and price protection and stock rotation rights. The Company records reductions to net revenues related to future product returns based on the Company’s expectations and historical experience. Typically, variable consideration does not need to be constrained as estimates are based on specific contract terms. However, the Company continues to assess variable consideration estimates such that it is probable that a significant reversal of revenue will not occur. The transaction price for a contract with multiple performance obligations is allocated to the separate performance obligations on a relative standalone selling price basis. Standalone selling prices for products are determined based on the prices charged to customers, which are directly observable. Standalone selling price of the professional services are mostly based on time and materials. The Company determines its ~~consolidated financial statements.~~estimates of variable consideration based on historical collection experience with similar payor classes, aged accounts receivable by payor class, terms of payment agreements, correspondence from payors related to revenue audits or reviews, the Company’s historical settlement activity of audited and reviewed claims and current economic conditions using the portfolio approach. Revenue is recognized only to the extent that it is probable that a significant reversal of the cumulative amount recognized will not occur in future periods.

Revenue is then recognized for each distinct performance obligation as control is transferred to the customer. Revenue attributable to hardware is recognized at the time control of the product transfers to the customer. Control is generally transferred when the Company has a present right to payment and title and the significant risks and rewards of ownership of products or services are transferred to its

(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)

customers. For most of the Company’s revenue attributable to hardware, control transfers when products are shipped. Revenue attributable to professional services is recognized as the Company performs the professional services to the customer.

The following table presents the ~~FASB, issued ASU 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606),~~ ~~as amended, which affects any entity that either enters into~~Company’s net revenue disaggregated by product category:

The Company has elected to account for shipping and handling activities related to contracts with customers as costs to fulfill the promise to transfer ~~goods~~the associated products.

The Company records reductions to net revenues related to future distributor product returns based on the Company’s expectation. The Company had allowances for distributor product returns totaling approximately $300 as of September 30, 2021.

Applying the practical expedient, the Company recognizes the incremental costs of obtaining contracts as an expense when incurred when the amortization period of the assets that otherwise would have been recognized is one year or less. These costs are included in sales and ~~services or enters into contracts~~marketing expenses.

The non-recurring costs associated with design and development of new products for technical approval, represent costs to fulfill a contract pursuant to ASC 340-40 Other Assets and Deferred Costs. Accordingly, the ~~transfer~~Company capitalizes these non-recurring engineering costs and amortizes such costs over the estimated period of nonfinancial assets. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration totime over which the company expects to be entitled in exchange for those goods or services. The standard has a five-step approach which includes identifying the contract or contracts, identifying the performance obligations, determining the transaction price, allocating the transaction price and recognizing revenue. In doing so, companies will need to use more judgment and make more estimates than under the currently effective guidance. These judgments may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The new standard may, in certain circumstances, impact the timing of when revenue is recognized for products shipped, and the timing and classification of certain sales incentives, whichthey are expected to ~~generally~~ be ~~recognized earlier than historical guidance.~~ recovered, which is typically 4 years, the estimated life of a particular model phone.

The ~~standard also significantly expands~~total capitalized costs to fulfill a contract is primarily associated with Company’s introduction of the ~~quantitative~~XP8 model phone and ~~qualitative disclosure requirements for revenue, which are intended~~ now the XP3 Plus model feature phone. As of September 30, 2021, and December 31, 2020, the total costs to ~~help users of financial statements understand the nature, amount, timing~~fulfill a contract included in other assets were $2,684 and ~~uncertainty of revenue and the related cash flows.~~ $2,889, respectively.

The standard will be effective for nonpublic business entities beginning for annual periods after December 15, 2018 and interim reporting periods within annual reporting periods beginning after December 15, 2019. While, early adoption is permitted, we plan to adopt the standardCompany records accounts receivable when it ~~effective for us in 2019.~~

~~The guidance permits two methods~~has an unconditional right to consideration. As of ~~adoption,~~September 30, 2021, the full retrospective method applying the standard to each prior reporting period presented, or the modified retrospective method with a cumulative effect of initially applying the guidance recognized at the date of initial application. The standard also allows entities to apply certain practical expedients at their discretion. We currently anticipate adopting the standard using the modified retrospective method with a cumulative adjustment and will provide additional disclosures comparing results to previous U.S. GAAP in our fiscal 2019 consolidated financial statements. We plan to apply the new revenue standards only to contracts not completed as of the date of initial application, referred to as open contracts.

~~While the Company’s evaluation of the impact of this new guidance is not complete, we believe the impact of the new standard related to revenue recognition will~~Company did not have a ~~material impact on our consolidated financial statements other than potentially expanded disclosures. More judgements~~contract receivable balance. Contract liabilities are recorded when cash payments are received or due in advance of performance. Contract liabilities consist of advance payments and ~~estimates~~deferred revenue, where the Company has unsatisfied performance obligations. Contract liabilities are required under Topic 606 than are required under Topic 605, including estimating the stand alone selling price (“SSP”) for each performance obligation identified within our arrangements with multiple elements and estimating the amountpresented as a component of variable considerations at inception of the arrangement. We will continue to evaluate sales incentives provided to our customers in order to determine the transaction price at inception of the contract.

~~This preliminary assessment is based~~ deferred revenueon the ~~revenue arrangements currently in place.~~ condensed consolidated balance sheets. As of January 1, 2021, and September 30, 2021, the contract liabilities were $5 and 0, respectively.

The ~~exact impact~~following table is a rollforward of ~~ASC 606 will be dependent on facts~~contract balances as of September 30, 2021:

(In thousands of U.S. dollars, except share and ~~circumstances at adoption and could vary~~per share amounts or as otherwise disclosed)

Revenue from ~~quarter to quarter. New products or offerings, or changes to current offerings, may yield significantly different impacts~~customers with concentration greater than currently expected. Our conclusions will be reassessed periodically based on current facts and circumstances. We are also evaluating accounting systems, processes and internal controls over revenue recognition to assist us10% in the ~~application~~three and nine months ended September 30, 2021, and 2020 accounted for approximately the following percentage of ~~the new standard.~~total revenues:

The fair value measurements standard establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy under the standard are describedbelow:

Level 1—Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access.

~~(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)~~

If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability.

Level 3—Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The ~~asset’s~~assets or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservableinputs.

Following is a description of the valuation methodologies used for assets and liabilities measured at fair value. There have been no changes in the methodologies used at ~~March 31, 2019 and 2018,~~September 30, 2021, and December 31, ~~2018.~~2020.

Money market funds are classified within level 1 of the fair value hierarchy because they are valued using quoted market prices.

(In thousands of ~~the fair value hierarchy because there was no active market for the warrant~~U.S. dollars, except share and per share amounts or for similar warrants. The fair value of the Series A and Series B warrants at March 31, 2018, was estimated by first applying a weighting of the income approach and the market approach to determine the equity value of the Company. An Option-Pricing Method (“OPM”) was then used to allocate the total equity value of the Company to the different classes of equity according to their rights and preferences. As the Company was a private company at March 31, 2018, the fair value measurement was based on significant inputs that are not observable in the market thus represents Level 3 inputs. As of March 31, 2019, and December 31, 2018, as a result of the Company’s November 2018 stock conversion of preferred shares into common shares, all Series A and Series B warrants outstanding are now exercisable into common stock and are no longer required to be remeasured at fair value on a recurring basis.otherwise disclosed)

Trade-in guarantee liability is classified within level 3 of the fair value hierarchy because the fair value measurement is based on inputs that are not observable in the market, including the probability and timing of a customer upgrading to a new device and the value of the upgraded device.

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

The following tables sets forth by level, within the fair value hierarchy, the Company’s assets ~~and liabilities~~ at fair value:

The following table presents the components of the Company’s inventory as of September 30, 2021, and December 31, 2020:

(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)

The ~~table below sets forth a summary~~Company analyzes the need for reserves for potential credit losses and records allowances for doubtful accounts when necessary. The Company had allowances for such losses totaling approximately $750 and $65 as of ~~changes in the fair value~~September 30, 2021, and December 31, 2020, respectively. The entire amount of the ~~Company’s level 3 liabilities~~allowance was for ~~the three months ended March~~a distributor who is not a 10% customer.

Trade receivables from 2 customers approximated 22% and 15% of total accounts receivable at September 30, 2021, and receivables from 2 customers approximated 26% and 10% of total trade receivables at, December 31, ~~2019 and 2018:~~

The table below sets forth the activity in the warranty liability ~~which is included in accrued expenses on the condensed consolidated balance sheet,~~ for the ~~three~~nine months ended ~~March 31, 2019~~September 30, 2021, and ~~2018:~~2020:

~~(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)~~NOTE 7 —Long-Term Debt

The Company has a loan and security agreement (“LSA”) with East West Bank (the “Senior Lender”). The maximum borrowings available under the line of credit is $8,000 and will bear interest at 1% plus the Prime Rate with a maturity date of May 2019.

~~As of both March 31, 2019 and December 31, 2018, the Company had remaining borrowing capacity of $8,000 against the line of credit.~~

~~Riley Loan~~— On October 26, 2017 (the “Effective Date”), the Company entered into a Subordinated Term Loan and Security agreement (the “Loan Agreement”) with B. Riley Principal Investments, LLC (“BRPI”), an affiliate of B. Riley Financial, Inc., a shareholder of the Company. Under the original Loan Agreement, the Company could borrow principal up to $10,000 via a subordinated secured convertible promissory note (the “Convertible Note”), with an optional conversion feature as described below.

During the year ended December 31, 2018, the Company amended the Loan Agreement to increase the available aggregate principal borrowings to $12,000. The 2018 amendments did not change the terms of the original Loan Agreement other than to provide a waiver of the defined prepayment penalties if any repayment does not reduce the principal amount outstanding below $10,000. The Loan Agreement, as amended, matures on September 1, 2022 (the “Maturity Date”) and carries a stated interest rate of 10% and provided that the first year of interest be compounded into the principal on October 26, 2018, with interest-only payments beginning thereafter.

~~As of both March 31, 2019 and December 31, 2018, the total outstanding borrowings under the Loan Agreement, as amended, was $12,000 and total accrued interest outstanding was $1,001.~~

~~Optional Conversion~~— On November 2, 2018, in conjunction with the Company’s conversion of all of its outstanding shares of preferred stock into shares of common stock (See Note 6) and the 15-to-1 reverse stock split, the Company amended the optional conversion terms of its existing Convertible Note. As amended the Convertible Note provides that at any time, on or prior to the Maturity Date, BRPI may elect to convert principal amounts outstanding, including accrued interest, as limited below, into shares of common stock at $8.87 per share. The number of shares of common stock to be issued upon conversion is limited to the sum of (A) the lesser of (i) the principal outstanding and (ii) the aggregate principal amount borrowed under the Loan Agreement to date multiplied by the Designated Percentage as described below, and (B) accrued interest. The “Designated Percentage” is one hundred percent (100%) if the conversion date is prior to the first anniversary of the Effective Date, seventy-five percent (75%) in Year 2 of the Loan Agreement, fifty percent (50%) in Year 3, twenty-five percent (25%) in Year 4, and twelve and a half of percent (12.5%) in the final year of the Loan Agreement on or prior to the Maturity Date.

~~Promissory Notes Payable~~—In 2014 and 2017, the Company entered into agreements with one of its suppliers, whereby certain of its trade payables for royalties and royalty up-front payments were converted to payment plans. In December 2018, the Company amended its accounts payable financing agreements, effective January 1, 2019, which provides for the $736 outstanding balance to be paid in ~~twenty~~20 equal quarterly installments. The amounts due under these agreements ~~would be~~are paid in quarterly installments over periods from two to four years, with interest ranging up to 8%. Remaining balances are ~~$619~~$251 and ~~$718~~$362, at ~~March 31, 2019~~September 30, 2021, and December 31, ~~2018,~~2020, respectively.

On September 15, 2021, the Company effected a 1-for-10 stock split (the “Reverse Stock Split”) of its issued and outstanding shares of common stock on that date. Additionally, the number of shares of the Company’s common stock subject to outstanding stock options and restricted stock units, the exercise price of all of its outstanding stock options, and the number of shares of common stock reserved for future issuance pursuant to its equity compensation plans were adjusted proportionately in connection with the Reverse Stock Split. The number of authorized shares of common stock under the Company’s Amended and Restated Certificate of Incorporation and the par value per share of its common stock were unchanged. All historical share and per share amounts presented herein have been adjusted retrospectively to reflect these changes.

On June 30, 2021, we entered into an At Market Issuance Sales Agreement (“Sales Agreement”) with B. Riley Securities, Inc. and EF Hutton, a division of Benchmark Investments, LLC (“Sales Agents”) to sell shares of our common stock, $0.001 par value per share, having an aggregate offering price of up to $10,000, from time to time, through an “at-the-market offering” program (the “June 2021 ATM Program”). Under the terms of the Sales Agreement, we paid the Sales Agents a commission equal to 3.0% of the gross proceeds from each sale of common stock sold through it under the Sales Agreement. We exhausted this June 2021 ATM Program on July 14, 2021, selling an aggregate of 1,820,785 shares of our common stock at an average price per share of $4.59 and for net proceeds of approximately $8,363 during the three ~~financing arrangements totaling~~and nine months ended September 30, 2021.

On September 23, 2021, we entered into a new At Market Issuance Sales Agreement with the same B. Riley Securities, Inc., as sales agent, to sell shares of our common stock, $0.001 par value per share, having an aggregate offering price of up to $41,637 from time to time, through a new “at the market offering” program (the “ATM Program”). Under the terms of the Sales Agreement, we will pay B. Riley Securities, Inc. a commission equal to 3.0% of the gross proceeds from each sale of common stock sold through it under the Sales Agreement. From September 27, through September 30, 2021, we issued and sold an aggregate of 735,003 shares of our common stock at an average price per share of $2.69 under the ATM Program for net proceeds of approximately ~~$472~~$1,974. All proceeds were received by September 30, 2021, with ~~remaining maturity dates~~exception of ~~June 2020~~$1,291, which were received by October 4, 2021. The outstanding net proceeds were classified as long term other assets since the cash was collected prior to the issuance of our financial statements, and ~~August 2020. As~~as such, the statement of ~~March 31, 2019 and December 31, 2018, the remaining balances are $184 and $238, respectively.~~cashflows reflects $9,046 in cash collected as of September 30, 2021.

~~Future aggregate annual principal payment on all long-term debt, excluding discount of $418, are as follows for the next 5 years~~

(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)

~~Under~~2021, we had approximately $24.8 million available for future issuances under the Company’s Amended and Restated Certificate of Incorporation dated October 23, 2017 the authorized capital stock of the Company consisted of 33,853,333 shares of capital stock (par value of $0.001 per share), comprising 18,666,666 shares of common stock and 15,186,664 shares of convertible preferred stock, of which 1,266,666 shares were designated as Series A-3, 1,186,666 shares were designated as Series A-2 convertible preferred stock (“Series A-2”), 1,733,333 shares were designated as Series A-1 convertible preferred stock (“Series A-1”), 9,333,333 shares were designated as Series A, and 1,666,666 shares have been designated as Series B convertible preferred stock (“Series B”).

On November 2, 2018, the Company amended and restated its previous certificate of incorporation and adjusted its authorized capital stock (par value of $.001) to consist of 100,000,000 shares of common stock and 5,000,000 shares of preferred stock.

On November 1, 2018, the Company also converted all outstanding shares of Series A, Series A-1, Series A-2 and Series B into shares of common stock. Prior to this conversion, the Company also approved the payment of dividends to all holders of Series A, Series A-1 and Series A-2 of record on this date. The value of the dividends of $6,539 were determined in accordance with the terms of the Amended and Restated Certificate of Incorporation dated October 23, 2017 based on the stated dividend rate per respective Series. The total Series A, Series A-1 and Series A-2 shares issued as dividends in the year ended December 31, 2018 was 944,694, 66,255 and 49,456, respectively. The dividends of $10,152 were recorded at fair value as of the date of Board approval. The total outstanding preferred shares of 13,277,864, inclusive of historical shares issued as dividends, were converted into common stock. Each outstanding share of common stock entitles the holder to one vote of each matter properly submitted to the stockholders of the Company for vote. During the three months ended March 31, 2019, no shares of preferred have been issued.

On November 2, 2018, the Company entered into a Securities Purchase Agreement for the sale of 2,089,136 shares of common stock, under which 1,270,905 shares of common stock were sold as of December 31, 2018, at $7.18 per share for net proceeds of approximately $8,295. Issuance cost approximating $831 were incurred and netted against the proceeds within the condensed consolidated statements of stockholder’s equity (deficit). The Company sold an additional 227,628 shares of common stock for gross proceeds of $1,634 in January 2019.ATM Program.

~~During~~Stock-based compensation expense for the three and nine months ended ~~March 31, 2019, there was no activity related to the Company’s warrants. The following table discloses warrants issued~~September 30, 2021, and ~~outstanding~~2020 is as ~~of both March 31, 2019 and December 31, 2018:~~follows:

Stock option activity for the nine months ended September 30, 2021, is set forth in the table below and reflects the 1-for-10 Reverse Stock Split that became effective on September 15, 2021:

*The intrinsic value is calculated as the difference between the exercise price and the fair value of the common stock on the balance sheet date.

As of September 30, 2021, there was approximately $1,758 of unamortized stock-based compensation cost related to unvested stock options, which is expected to be recognized over a weighted average period of approximately three years.

Restricted stock units’ (“RSU”) activity for the nine months ended September 30, 2021, is set forth in the table below and reflects the 1-for-10 Reverse Stock Split that became effective on September 15, 2021:

(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)

As of ~~March 31, 2019, the Company had the 2012 Equity Incentive Plan (the “Option Plan”) in place. As of March 31, 2019, the number of shares available to be issued under the Option Plan was 459,075.~~

~~The Option Plan provides~~September 30, 2021, unvested RSU’s totaled 176,887 shares. There were 47,597 RSU’s granted for the ~~grant of incentive~~nine months ended September 30, 2021, and nonstatutory stock options (“Options”), stock appreciation rights (“SAR”), restricted stock awards (“RSA”), and restricted stock unit awards (“RSU”) to employees, nonemployee directors, and consultants of the Company. Awards269,200 RSU’s granted under the Option Plan generally becomes exercisable ratably over a two-year or four-year period following the date of grant and expire ten years from the date of grant. At the discretion of the Company’s Board of Directors, certain awards may be exercisable immediately at the date of grant but are subject to a repurchase right, under which the Company may buy back any unvested shares at their original exercise price in the event of an employee’s termination prior to full vesting. All other awards are exercisable only to the extent vested. At March 31, 2019 and December 31, 2018, there were no shares that had been early exercised that were subject to the Company’s repurchase right at that date. The exercise price or strike price for Options and SARs granted under the Option Plan must generally be at least equal to 100% of the fair value of the Company’s common stock at the date of grant, as determined by the Board of Directors. The exercise price of incentive stock options granted under the Option Plan to ten percent stockholders must be at least equal to 110% of the fair value of the Company’s common stock at the date of grant, as determined by the Board of Directors, and are not exercisable after five years from the date of grant.

~~Stock-based compensation expense~~ for the ~~three~~nine months ended ~~March 31, 2019 and 2018 is as follows:~~

~~Stock option activity for the three months ended March 31, 2019 is as follows:~~

As of ~~March 31, 2019, there was approximately $707 of unamortized stock-based compensation cost related to unvested~~September 30, 2021, shares issued under the employee stock ~~options, which is expected to be recognized over a weighted average period of three years.~~

~~(In thousands of U.S. dollars, except share~~purchase plan (“ESPP”) totaled 36,056 shares. There were 9,992 ESPP shares issued for $38, in the nine months ended September 30, 2021, and ~~per share amounts or as otherwise disclosed)~~6,426 ESPP shares issued for $42, in the nine months ended September 30, 2020.

In determining quarterly provisions for income taxes, the Company uses the annual estimated effective tax rate applied to the actual year-to-date profit or loss, adjusted for discrete items arising in that quarter. The Company’s annual estimated effective tax rate differs from the U.S. federal statutory rate primarily as a result of state taxes, foreign taxes, and changes in the Company’s valuation allowance against its deferred tax assets. For the three months ended ~~March 31, 2019~~September 30, 2021, and ~~2018,~~2020, the Company recorded provisions for income taxes of ~~$295,~~$90, and ~~$534,~~$150, respectively.

~~On December 22, 2017, President Trump signed into law~~ For the ~~Tax Cuts~~nine months ended September 30, 2021, and Jobs Act (the Tax Act), which significantly changes existing U.S. tax laws, including a reduction in the corporate tax rate from 35% to 21%, a move from a worldwide tax system to a territorial system, as well as other changes. The tax rate reduction was effective January 1, 2018. Beginning in 2018,2020, the Company ~~became subject to the global intangible low-taxed income (GILTI)~~recorded provisions ~~of the Tax Act on the income of the Company’s foreign subsidiary.~~ ~~The Company’s foreign subsidiaries are profitable in Q1 2019 and forecast profits~~ for all of 2019. The GILIT subjects the income of the foreign subsidiaries to U.S. taxation. The Company’s accounting policy related to the GILTI is to treat GILTI related book/tax differences as period costs and to use the incremental cash tax savings approach in evaluating the Company’s U.S. net operating loss valuation allowance assessment.

The Company's income tax returns are subject to examinations by the Internal Revenue Service and other tax authorities in various jurisdictions. In accordance with the guidance on the accounting for uncertainty in income taxes the Company regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of its provision for income taxes. These assessments can require considerable estimates$227, and judgments. As of March 31, 2019, the gross amount of unrecognized tax benefits was approximately $6,000, of which $700, if recognized, would reduce the effective income tax rate in future periods. If the Company's estimate of income tax liabilities proves to be less than the ultimate assessment, then a further charge to expense would be required. If events occur and the payment of these amounts ultimately proves to be unnecessary, the reversal of the liabilities would result in tax benefits being recognized in the period when the Company determines the liabilities are no longer necessary. The Company does not anticipate any material changes to its uncertain tax positions during the next twelve months.$513, respectively.

The terms and conditions of applicable bylaws, certificates or articles of incorporation, agreements or applicable law may obligate Sonimunder certain circumstances to indemnify its current and former directors, officers or employees, and underwriters, with respect to certain of the matters described below and Sonim has been advancing legal fees and costs to certain current and former directors, officers, employees and underwriters in connection with certain matters describe below.

Royalty payments—The Company is required to pay per unit royalties to wireless essential patent holders and other providers of integrated technologies on mobile devices delivered, which, in aggregate, amount to less than 5% of net revenues associated with each unit and expire in 2021 and ~~2023.~~2026. Royalty expense for the three months ended ~~March 31,~~September 30, 2021, and 2020 was $524 and $470, respectively. Royalty expense for the nine months ended September 30, 2021, and 2020 was $1,369 and $1,664, respectively. The Company may be required to pay additional royalties to additional patent holder and technology providers on future products.

Securities litigation—On September 20, 2019, a purported Sonim stockholder who allegedly purchased stock registered in Sonim’s initial public offering (“IPO”) filed a putative class action complaint in the Superior Court of the State of California, County of San Mateo, captioned Pearson v. Sonim Technologies, Inc., et al., Case No. 19CIV05564, on behalf of himself and ~~2018 was $451~~others who purchased shares of Sonim registered in the IPO (the “Pearson Action”). On October 4 and ~~$411, respectively, which are included~~16, 2019, two additional purported class action complaints substantially similar to the Pearson Action were filed on behalf of different plaintiffs yet the same putative class of Sonim stockholders, in ~~cost of revenues~~the same court as the Pearson Action (the “’33 Act State Court Actions”). The defendants asked the Superior court to dismiss the “33 Act State Court Actions based on the ~~condensed consolidated~~provision in the Company’s Amended and Restated Certificate of Incorporation requiring stockholders to file and litigate in federal court any claims under the Securities Act of 1933. On December 7, 2020, the Superior Court entered an order granting defendants’ motion to dismiss. On October 7, 2019, a substantially similar putative class action lawsuit was filed in the United States District Court for the Northern District of California (the “’33 Act Federal Action”). All four complaints allege violations of the Securities Act of 1933 by Sonim and certain of its current and former officers and directors for, among other things, alleged false or misleading statements and omissions in the registration statement issued in connection with the IPO, relating primarily to an alleged failure to disclose software defects in Sonim’s phones and alleged misstatements about performance characteristics of ~~operations.~~Sonim’s phones. In July 2020, the Company entered into an agreement with the Lead Plaintiff in the ‘33 Act Federal Action to settle that case on a class wide basis for $2.0 million. As a result, the Company has paid out the $2.0 million settlement as of December 31, 2020. On March 5, 2021, the court presiding over the ’33 Act Federal Action granted final approval of the settlement.

Securities and Exchange Commission Formal Order of Private Investigation: In March 2020, the Company received a voluntary document request from the SEC San Francisco Regional office, and in August 2020, the Company was informed that the SEC Staff was conducting a formal investigation into events that occurred in 2018-2019. The Company has been cooperating in the SEC’s ongoing investigation. In October 2021, the Company and the SEC Staff began discussions regarding a potential resolution of the investigation, Those discussions are ongoing. The Company is unable to predict the likely outcome of the investigation, including whether it can be resolved through settlement negotiations, or determine its potential impact, if any, on the Company.

Derivative litigation— On September 21, 2020, the Company, and certain of its current and former directors and officers were sued

(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)

by a stockholder on behalf of our Company in a derivative action in the United States District Court for the District of Delaware, captioned Kusiak v. Plaschke, et al., Case No 20-cv-1270-MN (“Kusiak”). The Kusiak complaint is based largely on the same underlying factual allegations as the ’33 Act Federal Action. The defendants filed a motion to dismiss the Kusiak derivative action based on plaintiff’s failure to make a litigation demand on Sonim’s directors. On February 1, 2021, plaintiff in Kusiak voluntarily dismissed the action without prejudice.

On February 1, 2021, the same plaintiffs’ lawyers in the Kusiak action filed a new derivative action in the United States District Court for the District of Delaware against the Company and certain of its current and former directors and officers, captioned Gupta v. Plaschke, et al., Case No. 1:21-cv-130-MN (“Gupta”). The allegations in the Gupta complaint are generally similar to those in the Kusiak action. The defendants filed a motion to dismiss the Gupta derivative action based on plaintiff’s failure to make a litigation demand on Sonim’s directors. Given the early stages of this proceeding and the limited information available, the Company cannot predict the outcome of this legal proceeding or determine its potential impact, if any, on the Company.

General litigation—The Company is involved in ~~lawsuits, claims, investigation, and~~various other legal proceedings ~~that arise~~arising in the ~~ordinary~~normal course of business. The Company ~~records~~does not believe that the ultimate resolution of these other matters will have a provision for a liability when management believes that it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. The Company reviews these provisions at least quarterly and adjusts them to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular case.

~~Based~~material adverse effect on its experience, the Company believes that any settled amounts is not a meaningful indicator of the Company’s potential liability pertaining to litigation matters. The Company believes that it has valid defenses with respect to legal matters pending against it. Nevertheless, it is possible that cash flows orcondensed consolidated financial position, results of operations, ~~could~~or cash flows.

The results of any future litigation cannot be ~~materially affected in any particular period by~~predicted with certainty and, regardless of the ~~unfavorable resolution~~outcome, litigation can have an adverse impact on the Company because of ~~one or more~~defense and settlement costs, diversion of ~~these contingencies.~~management time and resources and other factors.

Indemnification—Under the terms of its agreements with wireless carriers and other partners, the Company has agreed to provide indemnification for intellectual property infringement claims related to Company’s product sold by them to their end customers. From time to time, the Company receives notices from these wireless carriers and other partners of a claim for infringement of intellectual property rights potentially related to their products. These infringement claims have been settled, dismissed, have not been further pursued by the customers, or are pending for further action by the Company.

Contingent severance obligations—The Company has agreements in place with certain key employees (Executive Severance Arrangements) guaranteeing severance payments under certain circumstances. Generally, in the event of termination by the Company without cause, termination due to death or disability, or resignation for good reason, the Company is obligated to the pay the ~~employees: (i)~~employees in accordance to the terms of the agreements. On May 31, 2021, the Company and Tom Wilkinson agreed that he will cease serving as the Company’s Chief Executive Officer. In connection with his departure, the Company entered into a Separation and Release Agreement with him pursuant to which he will continue to be paid his base salary of $400, the rate in effect on the effective date for a period of twelve months, subject to tax withholding and any ~~time before~~other authorized deductions, and will continue to be eligible for the Transaction Bonus Plan until November 30, 2021.

On December 11, 2019, the Board of Directors approved the Sonim Technologies Inc. Transaction Bonus Plan (the “Plan”) that is intended to incentivize Company employees who are in a ~~Change~~position to significantly impact the value received by the Company’s stockholders in ~~Control, amounts up~~a change of control transaction. Pursuant to ~~$1,057 or (ii) if at any time within 12 months~~the Plan, upon consummation of a ~~Change~~change of control transaction, 10% of the consideration payable to Company stockholders, after deducting transaction expenses, will be distributed to Plan participants, including the Company’s named executive officers. The Plan has a three-year term and may be extended by the administrator of the Plan. Subject to the terms of the Plan, participants must be continuously providing services to the Company through the date of the closing of a change in ~~Control, amounts up~~control transaction to ~~$1,407. In addition,~~be eligible to receive a bonus thereunder, except in the event of death or disability or involuntary termination ~~by the Company with~~without cause ~~the Company is obligated to pay the employees up to $88. The Company is obligated to pay one~~as further described in Section 5(c) and 5(d) of the Plan, and payment is contingent upon delivery and non-revocation of a general release of claims. In connection with the adoption of the Plan, the Board of Directors allocated a 50% interest in the Plan to Tom Wilkinson, the Company’s former Chief Executive Officer, and a 10% interest in the Plan to Robert Tirva, the Company’s President, Chief Operating Officer and Chief Financial Officer, and 35% to 6 other key employees ~~$140 if the Company has not been acquired or undertaken an Initial Public Offering at an equity~~and consultants.

(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)

~~valuation in excess of $125,000 at the time of one the events as defined above. As of March 31, 2019, and December 31, 2018, no accrual has beenrecorded.~~

~~Revenue transactions with a certain investor~~—During the three months ended March 31, 2018, the Company recognized revenue of $797 with an investor and holder of the August 2016 Series B warrants which were amended to common stock warrants in conjunction with the November 2018 preferred stock conversion event. The Company did not recognize any revenue with this investor during the three months ended March 31, 2019.

~~Management Services Agreement—~~In October 2017, the Company entered into a management services agreement with B. Riley Principal Investments, an investor, pursuant to which B. Riley Investments agreed to provide advisory and consulting services to the Company. The Company incurred approximately $50 in related consulting fees in each of the three months ended March 31, 2019 and 2018. The closing of the Company’s IPO (see Note 14), the management services agreement was terminated in accordance with its terms.

~~Net loss per share attributable to common stockholders for the three months ended March 31, 2018 was determined by increasing Net~~ l~~oss for the three months then ended by the number of cumulative dividends, not yet declared, on the Company's previously outstanding convertible preferred stock.~~ The following table sets forth the computation of the Company’s basic and diluted net loss per share attributable to common stockholders for the three and nine months ~~ended:~~

shown below and reflects the 1-for-10 Reverse Stock Split that became effective on September 15, 2021:

~~(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)~~

The ~~potentially~~ dilutive common shares that were excluded from the calculation of diluted net loss per share because their effect would have been antidilutive for the three and nine months ended, ~~March 31, 2019 and 2018, respectively,~~ are presented ~~are as follows:~~in the table below. The table also reflects the 1-for-10 Reverse Stock Split that became effective on September 15, 2021:

~~Segment Information~~—The Company operates in ~~one~~1 reporting segment. Operating segments are defined as components of an enterprise about which separate financial information is evaluated regularly by the chief operating decision maker, who is the president, chief ~~executive~~operating officer and chief financial officer, in deciding how to allocate resources and assessing performance. The Company’s chief operating decision maker allocates resources and assesses performance based upon discrete financial information at the consolidated level.

The following table summarizes the revenue by region based on ship-to destinations for the three and nine months ~~ended March 31, 2019 and 2018:~~ended:

~~Long-lived assets located in the United States and Asia Pacific region were $1,690 and $465 and $2,013 and $393 as of March 31, 2019 and December 31, 2018, respectively.~~

~~The composition of revenues for the three months ended March 31, 2019 and 2018 is follows:~~

~~Concentrations of Credit Risk—The Company’s product revenues are concentrated in the technology~~ ~~industry~~, which is highly competitive and rapidly changing. Significant technological changes in the industry or customer requirements, or the emergence of competitive products with new capabilities or technologies, could adversely affect the Company’s consolidated operating results. Financial instruments that potentially subject ~~the~~ Company to credit risk consist primarily of cash and cash equivalents and accounts receivable. Cash and cash equivalents are deposited with high-quality, federally insured commercial banks in the United States and cash balances are in excess of federal insurance limits at March 31, 2019 and December 31, 2018. The Company generallydoes not require collateral or other security in support of accounts receivable. To reduce credit risk, management performs ongoing credit evaluations of its customers’ financial condition. The Company analyzes the need for reserves for potential credit losses and records allowances for doubtful accounts when necessary. The Company had allowances for such losses totaling approximately $7 and $11 at March 31, 2019 and December 31, 2018, respectively.

(In thousands of U.S. dollars, except share and per share amounts or as otherwise disclosed)

~~Receivables from three customers approximated 49%, 24%, and 16% at March 31, 2019 and two customers approximated 44% and 43%~~The following table summarizes the composition of ~~total accounts receivable at December 31, 2018. Revenue from customers with concentration greater than 10% in~~revenues for the three and nine months ~~ended March 31, 2019 and 2018 accounted for approximately the following percentage of total revenues:~~ended:

~~On May 14, 2019,~~At the beginning of 2021, the Company ~~closed~~outsourced substantially all of its software development to a third-party and transferred 105 employees to support the ongoing work to be performed. In connection with outsourcing its software development, the Company entered into an ~~initial public offering (“IPO’)~~agreement of future business volume over the next three years in the amount of $7.1 million, of which the Company ~~sold 3,571,429~~ has committed to that a minimum value of $3.1 million will be assured in the first year of business. The Company has paid $2.5 million during the nine months ended September 30, 2021.

Additionally, in the beginning of 2021, the Company outsourced its manufacturing work to a supply chain partner and transferred 22 employees as part of this solution.

During 2020, the Company continued to reduce headcount to better align its expenses with its revenue profile. The Companyexecuted a reduction in force of approximately 10% of its U.S. employees in February 2020 and has also reduced headcount in certain international locations in India and Shenzhen. The Company has also relocated its headquarters from San Mateo, California to Austin, Texas, a lower cost location.

The table below sets forth the activity in the Company’s restructuring costs, which is included in accrued expenses on the condensed consolidated balance sheet, as of September 30, 2020:

Total restructuring costs of approximately $1.2 million were broken out between operating expenses of $1.1 million and cost of revenues of $0.1 million for the nine months ended September 30, 2020.

The Company paid insignificant bonuses and cash settlement of options for the India employees for the nine months ended September 30, 2021.

From October 1, 2021, through October 15, 2021, the Company received $14,283 in net proceeds from the sale of 6,813,183 shares of ~~its~~our common stock at aan average price to the public of $11.00 per share. On May 22, 2019, the Company sold an additional 505,714 shares of common stock, and our Chief Executive Officer sold 30,000 shares of common stock, at a price to the public of $11.00 per share ~~pursuant to the exercise~~ of ~~the underwriters’ option to purchase additional shares.~~ ~~The offer and sale of the shares in the IPO were registered~~$2.10 under the ~~Securities Act pursuant to a registration statement on Form S-1 (File No. 333-230887), which was declared effective by the SEC on May 9, 2019. The Company raised approximately~~ ~~$37,606 in net proceeds, after deducting underwriting discounts and commissions of $3,139 and offering expenses paid by us of approximately $4,102 .~~

The Company’s board of directors adopted, and its stockholders approved, the 2019 Employee Stock Purchase Plan and the 2019 Equity Incentive Plan in March 2019 and April 2019, respectively, each which became effective in connection with the IPO. ~~There are~~ ~~337,007 shares of common stock are reserved for issuance under the 2019 Employee Stock Purchase~~ ~~Plan.~~ Additionally, the number of shares of common stock reserved for issuance under the 2019 Employee Stock Purchase Plan will automatically increase on January 1 of each calendar year for 10 years, starting January 1, 2020, and ending on, and including, January 1, 2029, in an amount equal to the lesser of 1% of the total number of shares of capital stock outstanding on December 31^st of the prior calendar year, and (ii) 500,000 shares, unless the board of directors or compensation committee determines prior to such date that there will be a lesser increase, or no increase. 1,885,039 shares of common stock are reserved for future issuance under the 2019 Equity Incentive Plan, plus the number of shares subject to outstanding stock options or other stock awards that were granted under the Option Plan that are forfeited, terminated, expire or are otherwise not issued. Additionally, the number of shares of common stock reserved for issuance under the 2019 Equity Incentive Plan will automatically increase on January 1 of each calendar year for 10 years, starting January 1, 2020 and ending on and including January 1, 2029, in an amount equal to 5% of the total number of shares of capital stock outstanding on December 31 of the prior calendar year, unless the board of directors or compensation committee determines prior to the date of increase that there will be a lesser increase, or no increase.

~~On May 10, 2019, the Company issued 155,338 shares of common stock upon the exercise of warrants in exchange for total related exercise cash proceeds of $23.~~

On May 13, 2019, the Company granted a fully vested restricted stock award of 383,197 shares, and issued 210,758 net shares of common stock after withholding 172,439 shares of common stock to satisfy tax obligations associated with the grant, to the Company’s CEO as a bonus pursuant to his employment agreement.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with ~~our condensed consolidated financial statements~~the unaudited Condensed Consolidated Financial Statements and ~~the~~ related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and our ~~final prospectus filed with~~Annual Report on Form 10-K, as amended, for the year ended December 31, 2020. Certain statements in this report may constitute forward-looking statements within the meaning of the Private Securities ~~and Exchange Commission (the “SEC”) pursuant to Rule 424(b) under the Securities~~Litigation Reform Act of ~~1933, as amended,~~1995. Those forward-looking statements include all statements that are not historical statements of fact and those regarding our intent, belief or expectations, including, but not limited to, statements regarding our business strategies, growth prospects, operating and financial performance, plans, estimates and projections. These statements are based on ~~May 13, 2019 (“the Prospectus”).~~ management’s current expectations and beliefs and on information currently available to us. In ~~addition to historical consolidated financial information,~~some cases, you can identify forward-looking statements by the following ~~discussion contains~~words: "may," "will," "could," "would," "should," "expect," "intend," "plan," "anticipate," "believe," "estimate," "predict," "project," "potential," "continue," "ongoing" or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. These statements involve risks, uncertainties and other factors that ~~reflect our plans, estimates, and beliefs. Our~~may cause actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements, including but not limited to:

The above is not a complete list of factors or events that could cause actual results to differ from our expectations, and we cannot predict all of them. Although we believe that we have a reasonable basis for each forward-looking ~~statements.~~ statement contained in this report, we caution you that these statements are based on a combination of facts and factors currently known by us and our projections of the future, about which we cannot be certain. You should review the ~~section titled “Special Note Regarding Forward-Looking Statements”~~“Risk Factors” contained in Part I, Item 1A. of our Annual Report on Form 10-K, as amended, for ~~a discussion of forward-looking statements~~the year ended December 31, 2020, and in Part II, Item 1A ~~“Risk Factors”~~of this Quarterly Report on Form 10-Q for a discussion of factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis and elsewhere in this Quarterly Report on Form ~~10-Q~~10-Q. As a result of these factors, we cannot assure you that the forward-looking statements in this report will prove to be accurate. Furthermore, if the forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in ~~our Prospectus.~~any specified time frame, or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

We are a leading U.S. provider of ultra-rugged mobile phones and accessories designed specifically for task workers physically engaged in their work environments, often in mission-critical roles. We currently sell our ruggedized mobile phones and accessories to ~~three of~~ the ~~four~~three largest wireless carriers in the United States—AT&T, ~~Sprint~~T-Mobile, and Verizon—as well as the three largest wireless carriers in Canada—Bell, Rogers, and Telus Mobility. Our phones and accessories connect workers with voice, data, and workflow applications in two end-markets: industrial enterprise and public sector.

~~We generate revenues from sales of~~ In 2020, we announced that we would be entering the ruggedized barcode scanner business and we began shipping our ~~(i) mobile phones, (ii) industrial-grade accessories and (iii) beginning~~first devices in ~~2019, cloud-based software and application services. We sell~~March 2021. Our barcode scanner devices, as well as our ~~mobile~~ruggedized phones and accessories, ~~primarily to wireless carriers~~are sold through distributors in ~~both the United States~~North America, South America and ~~Canada, who then resell our products in conjunction with network services to end customers.~~

Revenues have grown 46% to $26.5 million in the period ended March 31, 2019 from $18.2 million in the period ended March 31, 2018. Such growth was primarily driven by the adoption of our complete product portfolio by the wireless carriers, which began in the first quarter of 2018 and lasted throughout 2018. In the period ended March 31, 2019, we launched the XP3, a rugged flip phone, with Sprint, extending our portfolio of stocked mobile phones at Sprint to three phones in the period ended March 31, 2019, from one phone in the same period in 2018. We expect to continue unit sales volumes with these wireless carriers and anticipate launching the XP3 with other wireless carrier customers, including AT&T where we launched commercial sales in April 2019, in the second and third quarters of 2019 following the customization and certification processes. Because our U.S. sales channel is primarily comprised of large wireless carriers, the number of customers that we sell to is limited. For the period ended March 31, 2019, approximately 87% of our revenues came from wireless carrier customers and 82% came from our top five customers. For the period ended March 31, 2019, our smartphones accounted for approximately 35% of our units sold and our feature phones accounted for approximately 65% of our units sold, as compared to approximately 56% and 44% respectively for the period ended March 31, 2018.

In February 2019 we announced the introduction of Sonim Scan, a subscription service which integrates a barcode scanning engine with the native camera on the XP8, allowing end users to scan up to 45 1D or 2D barcodes per minute. Revenues from this new product are not significant.

On May 9, 2019, our registration statement on Form S-1 (File No. 333-230887) related to our initial public offering (“IPO”) was declared effective by the SEC, and our common stock began trading on The Nasdaq Stock Market LLC (“Nasdaq”) on May 10, 2019. Our IPO closed on May 14, 2019. As a result, our condensed consolidated financial statements as of March 31, 2019 do not reflect the impact of our IPO. For additional information, see Note 13 - Subsequent Events to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

We review a variety of key financial metrics to help us evaluate growth trends, establish budgets, measure the effectiveness of our business strategies and assess operational efficiencies. In addition to our financial results determined in accordance with U.S. GAAP, we believe the following non-GAAP and operational measures are useful in evaluating our performance. related metrics.

Our smartphones include the XP6, XP7, and XP8 models. The number of smartphone units sold during the three months ended March 31, 2019 compared to the three months ended March 31, 2018 increased by 14%, primarily due to increased demand for the newer XP8, partially offset by decreased demand for older XP7 and XP6.

Our feature phones include the XP3, XP5, and XP5s models. The number of feature phone units sold during the three months ended March 31, 2019 compared to the three months ended March 31, 2018 increased by 176%, primarily due to increased demand for the XP5s from several carriers, increase in demand for the older XP5 from one major carrier, and the introduction of our newest feature phone, the XP3.

We define Adjusted EBITDA as net income (loss) adjusted to exclude the impact of stock-based compensation expense, depreciation and amortization, interest expense, net, income tax expense and change in fair value of warrant liability. We define Adjusted Covenant EBITDA as Adjusted EBITDA further adjusted to exclude the impact of exchange rate changes. Adjusted EBITDA and Adjusted Covenant EBITDA are useful financial metrics in assessing our operating performance from period to period by excluding certain items that we believe are not representative of our core business, such as certain material non-cash items and other adjustments such as stock-based compensation and changes in the fair value of the warrant liability. We use Adjusted Covenant EBITDA to periodically assess compliance with certain covenants and other provisions under our loan and security agreement, as amended from time to time, or the Loan Agreement, with East West Bank, or EWB.

~~We believe that Adjusted EBITDA and Adjusted Covenant EBITDA, viewed in addition to, and not in lieu of, our reported GAAP results, provide~~ ~~useful~~ ~~information to investors regarding our performance and overall results of operations for various reasons, including:~~

Adjusted EBITDA and Adjusted Covenant EBITDA have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations include:

~~Set forth below is a reconciliation from net loss to Adjusted EBITDA and Adjusted Covenant EBITDA for the three months ended March 31, 2019 and 2018.~~

We believe that the growth and future success of our business depend on many factors. While these factors present significant opportunities for our business, they also pose important challenges that we must successfully address in order to ~~sustain our growth and~~ improve our results of operations.

We believe that our performance is significantly dependent on the investments we make in research and development and that we must continue to develop and introduce innovative and high quality, new products on a two to ~~three year~~three-year cycle. While the hardware design of our devices is generally the same for all wireless carriers, each device must be configured to conform to the requirements of each wireless carrier’s network, resulting in higher development expenses as the number of wireless carriers we sell through increases. In addition to the design and configuration costs, each device must undergo a multi-month technical approval process at each carrier before it can be ~~stocked.~~certified to be stocked at such carrier. The approval process for each device for each carrier has historically cost ~~up to $1.7~~between $1-2 million. Prior to commencement of development of a product for certification, we generally do not receive any purchase orders or commitments. Following a carrier’s review of product concepts, we may receive a product award letter from that carrier to move forward with the development and certification process, at which time we may begin receiving advance purchase orders or commitments. Since the timing of when we seek technical approval with our wireless carriers tends to be cyclical in nature, quarter-over-quarter expenditures may vary significantly depending on the number of approvals in process during the quarter. If we fail to innovate and enhance our product offerings, our brand, market position and revenues may be adversely affected. If our research and development efforts are not successful, we will not recover these investments that we make. See the risk factor entitled “We may not be able to continue to develop solutions to address user needs effectively, including our next generation products, which would materially adversely affect our liquidity and our ability to continue operations.” in this Quarterly Report on Form 10-Q for more information.

We are focused on continuing to acquire new customers, both in North America and overseas, to support our long-term growth. Historically, we have been dependent on a small number of wireless carriers distributing our products. We have invested, and expect to continue to invest, ~~heavily~~ in our sales and marketing efforts to drive new customer acquisition. In particular, a key part of our strategy is to further expand the use of our solutions over dedicated LTE networks in the public safety market. We ~~will~~ also plan to continue to invest in ~~and expand our~~ international ~~sales teams.~~expansion. As a result, we expect our sales and marketing costs to increase as we

seek to acquire new customers. Sales and marketing investments will often occur in advance of any sales benefits from these activities, and it may be difficult for us to determine if we are efficiently allocating our sales and marketing resources.

We have historically experienced lower net revenue in ~~our first quarter compared~~the quarters leading up to ~~other quarters in our fiscal year due to seasonal demand associated with~~new product introductions, as the ~~introduction~~revenue decline of legacy products does not perfectly match the revenue ramp up of new ~~products to our lead customers.~~products. New product introductions can significantly impact net revenue, gross profit and operating expenses. The timing of product introductions can also impact our net revenue as our wireless carrier customers prepare for a new product launch, and channel inventory of an older product often declines as the launch of a newer product approaches. Net revenue can also be affected when consumers and distributors anticipate a new product introduction. However, neither historical seasonal patterns nor historical patterns of product or service introductions should be considered reliable indicators of our future pattern of product or service introductions, future net sales or financial performance.

As part of our restructuring, we have shifted the majority of new product engineering to several outsourced partners. As this is a new process for us, additional risk exists in our ability to meet product development timelines required by our customers until we gain experience with these partners. In addition, these development efforts require significant cash outlays in advance of the completion of the work. If the work is substandard, or does not meet our customers’ requirements, it is uncertain whether these expenditures can be recovered from our partners.

We had cash and cash equivalents of $10,187 and an accumulated deficit of $223,083 at September 30, 2021, and a net loss of $10,939 for the quarter ended September 30, 2021. Since inception, we have been developing ultra-rugged mobile phones and accessories designed specifically for task workers physically engaged in their work environments, often in mission-critical roles. Our ability to continue as a going concern is dependent on, among other things, our ability to complete ongoing and future development of our ultra-rugged mobile phones and accessories, continue commercial scale production and sell our products. We believe that our current level of cash and cash equivalents is not sufficient to fund commercial scale production and product sales. These conditions raise substantial doubt regarding our ability to continue as a going concern for a period of at least one year from the date of issuance of the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

To alleviate these conditions, management is currently evaluating various funding alternatives and may seek to raise additional funds through the issuance of equity, mezzanine or debt securities, through arrangements with strategic partners or through obtaining credit from government or financial institutions. As we seek additional sources of financing, there can be no assurance that such financing would be available to us on favorable terms or at all. Our ability to obtain additional financing in the debt and equity capital markets, including pursuant to our ATM Program (as defined below), is subject to several factors, including market and economic conditions, the Company’s performance and investor sentiment with respect to us and our industry. See Note 1 and risk factor entitled “Our unaudited condensed consolidated financial statements included a statement that there is a substantial doubt about our ability to continue as a going concern and a continuation of negative financial trends could result in our inability to continue as a going concern.” in this Quarterly Report on Form 10-Q for more information.

Beginning in the three months ended March 31, 2021, we entered the rugged handheld and tablet market with our new SmartScanner products. The Sonim RS80, an Android-based tablet that is certified as Android Enterprise Recommended by Google, became available in February 2021. Additionally, we shipped the Sonim RS60, an Android-based handheld computer and LTE device that is certified as Android Enterprise Recommended by Google, during the three months ended June 30, 2021. On June 30, 2021, we announced the RT80, an Android-based tablet that differs from the RS80 by not having an integrated barcode scanner.

During the nine months ended September 30, 2021, we prioritized spending on research and development of our new products, including our next generation feature phones, and we successfully launched the first product (the XP3 Plus) in the third quarter of 2021. These devices will utilize new processors for increased performance and provide expanded network support for additional and new carriers in the United States, as well as in Europe. They will also include new features and support usability requirements based on feedback from our current customers. In the nine months ended September 30, 2021, we saw strong demand for the initial ultra-rugged feature phone that launched in the third quarter of 2021, with shipments during the three months ended September 30, 2021, of approximately $4.3 million. We continue to see strong purchase order volume into the fourth quarter of 2021; such purchase orders are not binding and could be terminated at any time.

On June 29, 2021, we announced that we had secured design win awards with a leading U.S. carrier for two of our next-generation ultra-rugged phones expected to be introduced in 2022 – an upgraded feature phone with enhanced push to talk (“PTT”) capabilities, and a smartphone with 5G capabilities. The carrier design win awards were made based on the design specifications, feature set and costs provided by Sonim as part of an RFP process. We now have design win awards from the three largest U.S. carriers for new products that we began shipping as of September 30, 2021 and will continue through the third quarter of fiscal 2022. During the quarter ended September 30, 2021, we successfully launched the XP3 Plus to two major U.S. carriers. Design win awards do not obligate the carriers to purchase any devices and may be terminated at any time. In addition, such design wins will require additional capital and investment in research and development which the Company may not have access to or be able to raise.

At the beginning of 2021, we outsourced substantially all of our software development to a third-party and transferred 105 employees to support the ongoing work to be performed.In connection with outsourcing our software development, we entered into an agreement of future business volume over the next three years in the amount of $7.1 million, of which we have committed that a minimum value of $3.1 million will be assured in the first year of business. We have paid $2.5 million related to this agreement during the nine months ended September 30, 2021. The remaining $0.6 million is expected to be paid during the fourth quarter of 2021.

Additionally, in the beginning of 2021, we outsourced our manufacturing work to a supply chain partner and transferred or eliminated 22 employees as part of this solution. Ourworldwide employee count at September 30, 2021, was 78.

On May 31, 2021, Mr. Tom Wilkinson resigned from his positions and offices with Sonim, including as our Chief Executive Officer. In connection with and effective upon Mr. Wilkinson’s separation with the Company on May 31, 2021, the Board appointed Mr. Robert Tirva, the Company’s Chief Financial Officer, to the additional positions of President and Chief Operating Officer of the Company.

On April 28, 2021, we received a deficiency letter from the Listing Qualifications Department (the “Staff”) of The Nasdaq Stock Market, LLC (“Nasdaq”) notifying us that, for the last 30 consecutive business days, the bid price for our common stock had closed below $1.00 per share, which is the minimum closing price required to maintain continued listing on the Nasdaq Stock Market under Nasdaq Listing Rule 5450(a)(1) (the “Minimum Bid Requirement”). On September 15, 2021, we effected a 1-10 reverse stock split (“Reverse Stock Split”) of our issued and outstanding shares of common stock, which increased the trading price of our common stock on Nasdaq and resulted in a change in the number of shares of our outstanding stock from 85,161,562 to 8,516,122. Additionally, the number of shares of our common stock subject to outstanding stock options and restricted stock units, the exercise price of all of our outstanding stock options, and the number of shares of common stock reserved for future issuance pursuant to our equity compensation plans were adjusted proportionately in connection with the Reverse Stock Split. The number of authorized shares of common stock under our Amended and Restated Certificate of Incorporation and the par value per share of our common stock were unchanged.

On September 30, 2021, we received a letter from the Staff notifying us that we had regained compliance with the minimum bid requirement.

On June 30, 2021, we entered into an At Market Issuance Sales Agreement with B. Riley Securities, Inc. and EF Hutton, a division of Benchmark Investments, LLC to sell shares of our common stock, $0.001 par value per share, having an aggregate offering price of up to $10,000,000, from time to time, through an “at-the-market offering” program (the “June 2021 ATM Program”). We exhausted this June 2021 ATM Program in July 14, 2021, selling an aggregate of 1,820,785 shares of our common stock at an average price per share of $4.59 and for net proceeds of approximately $8,363,250.

On September 23, 2021, we entered a new At Market Issuance Sales Agreement (the “Sales Agreement”) with B. Riley Securities, Inc. (the “Sales Agent”) to sell shares of our common stock, $0.001 par value per share, having an aggregate offering price of up to $41,636,612 from time to time, through a new “at the market offering” program (the “ATM Program”). Under the terms of the Sales Agreement, we will pay the Sales Agent a commission equal to 3.0% of the gross proceeds from each sale of common stock sold through it under the Sales Agreement. From September 27, 2021, through October 15, 2021, we issued and sold an aggregate of 7,548,186 shares of our common stock at an average price per share of $2.16 under the ATM Program for net proceeds of approximately $16.3 million. As of October 31, 2021, we had approximately $24.8 million available for future issuances under the ATM Program.

In August 2021, we announced that we had initiated a review of our strategic alternatives and capital market options, including both buy and sell side opportunities. This process is ongoing, and we engaged B. Riley to assist in the process. There can be no assurances that the strategic and financing alternatives process will result in the announcement or consummation of any strategic or financing transaction, or that any resulting plans or transactions will yield additional value for shareholders. See the risk factor entitled “We cannot assure you that our exploration of strategic and financing alternatives will result in a transaction and/or financing or that any such transaction or financing would be successful, and the process of exploring strategic and financing alternatives or its conclusion could adversely impact our business and our stock price” in this Quarterly Report on Form 10-Q for more information.

The following tables present key components of our results of ~~operation~~operations for the three and nine months ended ~~March 31, 2019,~~September 30, 2021, compared to results for athe same period in ~~2018:~~2020:

													Three Months Ended September 30,												Nine Months Ended September 30,
	March 31, 2019			March 31, 2018			Increase (Decrease)			%			2021			2020			Increase (Decrease)			%			2021			2020			Increase (Decrease)			%
Net revenues	$	26,484		$	18,190		$	8,294			46	%	$	14,445		$	14,393		$	52			—		$	38,639		$	48,157		$	(9,518	)		(20	%)
Cost of revenues		17,105			12,927			4,178			32	%		12,661			9,994			2,667			27	%		31,738			36,675			(4,937	)		(13	%)
Gross profit		9,379			5,263			4,116			78	%		1,784			4,399			(2,615	)		(59	%)		6,901			11,482			(4,581	)		(40	%)
Total operating expenses		14,603			9,277			5,326			57	%
Operating expenses														12,507			10,518			1,989			19	%		33,160			33,282			(122	)		—
Loss from operations		(5,224	)		(4,014	)		(1,210	)		30	%		(10,723	)		(6,119	)		(4,604	)		75	%		(26,259	)		(21,800	)		(4,459	)		20	%
Interest and other expense, net		(687	)		(523	)		(164	)		31	%		(126	)		(195	)		69			(35	%)		(419	)		(1,211	)		792			(65	%)
Loss before income taxes		(5,911	)		(4,537	)		(1,374	)		30	%		(10,849	)		(6,314	)		(4,535	)		72	%		(26,678	)		(23,011	)		(3,667	)		16	%
Income tax expense		(295	)		(534	)		239			-45	%		(90	)		(150	)		60			(40	%)		(227	)		(513	)		286			(56	%)
Net loss	$	(6,206	)	$	(5,071	)	$	(1,135	)		22	%	$	(10,939	)	$	(6,464	)	$	(4,475	)		69	%	$	(26,905	)	$	(23,524	)	$	(3,381	)		14	%

For the three months ended ~~March 31, 2019,~~September 30, 2021, net ~~revenue increased to $26.5~~revenues were approximately $14.4 million, ~~a 46% increase~~as compared to ~~$18.2~~net revenues of $14.4 million ~~in net revenue~~ for the three months ended ~~March 31, 2018.~~September 30, 2020. Approximately ~~90%~~89% of net ~~revenue~~revenues for the ~~first~~third quarter of ~~2019~~2021 was attributable to North America, Canada, and Latin America compared to approximately ~~81%~~91% of net revenues in the ~~first quarter of 2018.~~same period in 2020. Our top ~~five~~three customers accounted for ~~82%~~approximately 72% of net ~~revenue~~revenues in the ~~first~~third quarter of ~~2019, compared to 77%~~2021, and our top four customers accounted for approximately 63% of net revenues for the same period in ~~2018. The increase resulted~~2020. Revenue for the three months ended September 30, 2021, was primarily ~~from i) a 14% increase in unit shipments~~driven by sales of our ~~smartphone product lines resulting from increased demand from several carriers, and ii) a 176% increase~~new XP3 Plus of $4 million which helped offset the decline in ~~unit shipments~~the sales of our ~~feature phones, resulting from a combination~~legacy products of ~~increased demand from multiple carriers~~$3.5 million.

For the nine months ended September 30, 2021, net revenues were $38.6 million compared to net revenues of $48.1 million for the ~~XP5s~~nine months ended September 30, 2020, a decrease of $9.5 million, or 20%. Approximately 95% of net revenue for the nine months ended September 30, 2021, was attributable to North America, Canada, and Latin America compared to approximately 94% for the ~~introduction~~nine months ended September 30, 2020. Our top three customers accounted for approximately 64% of our ~~newest~~net revenue for the nine months ended September 30, 2021, compared to approximately 61% of net revenue for the same period in 2020. The decline in revenue for the nine months ended September 30, 2021, was primarily driven by a drop in the number of unit sales of our legacy product by 79,699, or 39% due to the ~~low cost XP3, to Sprint. We expect to begin shipments~~aging of the existing product set, partially offset by the unit sales of the XP3 Plus of 25,380 and the unit scanner sales of 1,833.

Our customer agreements with channel partners set forth the terms pursuant to ~~other carriers~~which our channel partners purchase our products for distribution on a purchase order basis. While these arrangements are typically long term, they generally do not contain any firm purchase volume commitments. As a result, our channel partners are not currently contractually obligated to purchase from us any minimum number of products. The lack of firm purchase volume commitments makes it difficult for us to forecast customer demand. While our channel partners provide us with demand forecasts under these sales arrangements, we are generally required to satisfy any and all purchase orders delivered to us within specified delivery windows, with limited exceptions (such as orders significantly in excess of forecasts). Our sales arrangements also generally include technical performance standards for our mobile phones and accessories sold, which vary by channel partner. If a technical issue with any of our covered products exceeds certain preset failure thresholds for the ~~second~~relevant performance standard or standards, the channel partner typically has the right to cease selling the product, cancel open purchase orders and ~~third quarters~~levy certain monetary penalties. In addition, our channel partners retain sole discretion in which of ~~2019.~~their stocked products to offer their customers.

~~Our gross~~Gross profit for the three months ended ~~March 31, 2019 increased by $4.1~~September 30, 2021, was $1.8 million, as compared to $4.4 million for the three months ended ~~March 31, 2018.~~September 30, 2020, a decrease of $2.6 million or 59%. The ~~improvement was driven primarily by~~decrease in gross profit is a result of the product mix resulting in a lower average selling price along with an increase in ~~net revenue~~a higher average cost decreasing gross profit by approximately $2.5 million.

Gross profit for the nine months ended September 30, 2021, was $6.9 million, as compared to $11.5 million for the nine months ended September 30, 2020, a decrease of ~~46% from mobile phone sales, as well an increase~~$4.6 million or 40%. The decrease in gross ~~margin percentage from 28.9%~~profit is a result of a drop in ~~the first quarter of 2018 to 35.4 % in the first quarter of 2019. The increase~~unit sales which caused a decrease in gross ~~margin~~profit of approximately $5.1 million. The gross profit percentage ~~can be attributed~~dropped as a result of product mix related to ~~both component and overhead cost reductions per unit attributable to improved efficiency and volume increases in~~ our ~~factory and higher average net selling prices for the XP5s and the XP8, partially offset by the introduction of the~~ lower ~~gross~~ margin XP3 ~~in the first quarter of 2019.~~

~~Our net~~Net operating loss for the three and nine months ended September 30, 2021, compared to the three and nine months ended September 30, 2020, increased by $4.6 million and $4.5 million, respectively, driven primarily by the decrease in revenues discussed above and, the decrease in gross profit margin. The increase in operating expenses of $2.0 million and $0.1 million for the three and nine months ended September 30, 2021, and 2020, respectively.

	Three Months Ended September 30,										Nine Months Ended September 30,
	2021		2020		Change			% Change			2021		2020		Change			% Change
	(in thousands, except %)										(in thousands, except %)
Research and development expense	$	5,492	$	3,389	$	2,103			62	%	$	13,826	$	10,581	$	3,245			31	%
Sales and marketing expense		3,087		2,884		203			7	%		7,456		8,611		(1,155	)		(13	%)
General and administrative expense		2,961		2,477		484			20	%		7,602		7,644		(42	)		(1	%)
Legal expense		967		1,768		(801	)		(45	%)		4,276		5,359		(1,083	)		(20	%)
Restructuring costs		—		—		—			—			—		1,087		(1,087	)		(100	%)
Total Operating Expenses	$	12,507	$	10,518	$	1,989			19	%	$	33,160	$	33,282	$	(122	)		—

Research and development expenses for the three months ended ~~March 31, 2019~~September 30, 2021, were $5.5 million, as compared to $3.4 million for the three months ended ~~March 31, 2018~~September 30, 2020, an increase of $2.1 million, or 62%. These expenses increased ~~by $1.1~~primarily due to a $3.1 million ~~driven primarily~~increase in product development costs related to the new SmartScanner products and our next generation feature phone, partially offset by ~~increases~~ decreases in ~~operating~~employee headcount related expenses of ~~$5.3~~$0.5 million, consultant expenses of $0.3 million and other office expenses of $0.2 million.

Research and development expenses for the nine months ended September 30, 2021, were $13.8 million, as compared to $10.6 million for the nine months ended September 30, 2020, an increase of $3.2 million, or 31%. These expenses increased primarily due to a $6.1 million increase in product development costs related to the new SmartScanner products and our next generation feature phone, partially offset by a decrease in employee headcount related expenses of $2.4 million, consultant expenses of $0.3 million, depreciation expense of $0.2 million.

Sales and marketing expenses for the three months ended September 30, 2021, were $3.1 million, as compared to $2.9 million for the three months ended September 30, 2020, an increase of $0.2 million, or 7%. These expenses increased due to a $0.9 million increase in marketing related expenses, offset by decreases in headcount related expenses of $0.7 million.

Sales and marketing expenses for the nine months ended September 30, 2021, were $7.5 million, as compared to a $8.6 million for the nine months ended September 30, 2020, a decrease of $1.2 million, or 13%. These expenses decreased due to a $2.0 million decrease in employee headcount related costs, and a decrease in travel related expenses of $0.2 million, partially offset by an increase in ~~net revenue and~~marketing related ~~gross profit.~~ ~~Operating~~ expenses ~~are summarized as follows;~~ of $0.9 million.

~~Research~~General and ~~development. Research and development~~administrative expenses ~~increased by $3.3 million, or 63% from $5.1 million~~ for the three months ended ~~March 31, 2018 to $8.4~~September 30, 2021, were $3.0 million, ~~for the three months ended March 31, 2019. These expenses increased primarily due to $1.8 million of~~ ~~costs associated with technical approval processes required by wireless carrier customers,~~ as ~~well as new product launches,and $1.4 million of an associated increase in employee headcount.~~

~~Sales and marketing~~. ~~Sales and marketing~~ expenses increased by $1.2 million, or 47% from $2.5 million for the three months ended March 31, 2018 to $3.7 million for the three months ended March 31, 2019. These expenses increased primarily due to $~~0.7 million of new employee hires and $0.5 million of~~ ~~new product launch marketing expenses.~~

~~General and administrative. General and administrative expenses increased by $0.9 million, or 55% from $1.6 million for the three months ended March 31, 2018~~compared to $2.5 million for the three months ended ~~March 31, 2019. These~~September 30, 2020, an increase of $0.5 million, or 20%. This increase was due to an increase of $0.8 million in base debt related expenses, ~~increased~~partially offset by a decrease of $0.3 million in payroll related expenses.

General and administrative expenses for the nine months ended September 30, 2021, and 2020, were a consistent $7.6 million as a result of decreases in payroll related expenses of $0.4 million and other office related expenses of $0.1 million, partially offset by an increase in payroll related expenses of $0.5 million.

Legal expenses for the three months ended September 30, 2021, were $1.0 million, as compared to $1.8 million for the three months ended September 30, 2020, a decrease of $0.8 million, or 45%. The decrease of $0.8 million was primarily due to ~~$0.2~~decreased expenses related to the SEC investigation.

Legal expenses for the nine months ended September 30, 2021, were $4.3 million, as compared to $5.4 million for the nine months ended September 30, 2020, a decrease of ~~increased~~$1.1 million, or 20%. Legal expenses were higher than expected for the nine months ended September 30, 2021, and 2020 due to shareholder litigation as well as the ongoing SEC investigation. Legal expenses for the nine months ended September 30, 2021, include $4.3 million related to the SEC investigation. Legal expenses in the nine months ended September 30, 2020, include a $2.0 million legal settlement associated with the shareholder litigation and $3.4 million in other legal expenses, primarily related to the SEC investigation.

In September 2019, our Board of Directors approved, and our management commenced and completed, a restructuring plan to reduce operating costs and better align our workforce with the needs of our business. During the nine months ended September 30, 2021, we did not record any costs related to restructuring. During the nine months ended September 30, 2020, $1.1 million was recorded in restructuring costs. Our total worldwide employee ~~compensation and hiring~~count as of ~~new consultants and $0.5 million of professional fees.~~September 30, 2021, was 78.

We recorded $0.1 million in foreign exchange loss for the three months ended September 30, 2021. We recorded $0.2 million in net interest expense for the three months ended September 30, 2020. The ~~Company~~decrease in interest expense is a result of the payoff of the outstanding indebtedness to B. Riley Principal Investments, LLC (“BRPI”) in June 2020.

We recorded $0.3 million in foreign exchange loss ~~and $0.4 million in net interest expenses~~ for the ~~three~~nine months ended ~~March 31, 2019, whereas the Company recorded $0.1~~September 30, 2021, compared to $0.4 million in foreign exchange loss and ~~$0.4~~$0.8 million in net interest ~~expenses~~expense for the ~~three~~nine months ended ~~March 31, 2018.~~September 30, 2020. The decrease in interest expense is a result of the payoff of the outstanding indebtedness to BRPI in June 2020.

~~The Company~~We recognized income tax expense of ~~$0.3 million, and $0.5~~$0.2 million for the three months ended ~~March 31, 2019~~September 30, 2021 and ~~2018, respectively. Tax~~2020.

We recognized income tax expense of $0.2 million for the ~~three~~nine months ended ~~March 31, 2019 was $0.2 million lower than the~~September 30, 2021, as compared to income tax expense of $0.5 million for the ~~three~~nine months ended ~~March 31, 2018, primarily as a result of lower state tax expense recorded in the 2019 period compared to the 2018 period, and the application of interim period tax accounting principles.~~

Our Adjusted EBITDA for the three months ended March 31, 2019 compared to the three months ended March 31, 2018 decreased by approximately $1.3 million, primarily due to higher operating expenses, partially offset by increased gross profit, as described above.September 30, 2020.

Historically, we have funded operations from a combination of public and private equity financings, convertible loans from existing investors and borrowings under loan agreements. As of ~~March~~September 30, 2021, we did not have any convertible loans or any other borrowing structures in place.

Currently, our principal source of liquidity consists of cash and cash equivalents totaling $10.2 million, as September 30, 2021. During the nine months ended September 30, 2021, our net loss was $26.9 million, and it is likely that we will continue to experience operating losses into the future because we have not yet generated sufficient revenue levels needed to ensure profitability. Our cash balance during the quarter ended September 30, 2021, increased by $3.0 million primarily due to our ATM program. Although we remain subject to the risks and uncertainties associated with the development and release of new products, among others, we believe our operations have been streamlined to enable us to conduct business more effectively and efficiently despite near term economic uncertainty. However, our liquidity has been negatively impacted by a decline in the sales of our legacy products while our next generation products are still under development. In addition, legal expenses related to our ongoing SEC investigation have been significantly higher than expected and may continue to impact our results in the foreseeable future. In addition, the terms and conditions of applicable bylaws, certificates or articles of incorporation, agreements or applicable law may obligate us under certain circumstances to indemnify our current and former directors, officers or employees, and underwriters, with respect to certain of our litigation matters, including the ongoing SEC investigation, and we have been advancing legal fees and costs to certain current and former directors, officers, employees and underwriters in connection with certain of the matters disclosed in Note 11, Commitments and Contingencies. As a result of the foregoing, substantial doubt exists regarding our ability to continue as a going concern for a period of at least one year from the date of issuance for the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

To alleviate these conditions, our management is currently evaluating various funding alternatives and may seek to raise additional funds through the issuance of equity, mezzanine or debt securities, through arrangements with strategic or investment partners with greater resources or access to funds or through obtaining credit from government or financial institutions. As we seek additional sources of financing, there can be no assurance that such financing would be available to us on favorable terms or at all. Our ability to obtain additional financing in the debt and equity capital markets, including through our ATM Program, is subject to several factors, including market and economic conditions, our performance and investor sentiment with respect to us and our industry. See risk factor entitled “Our liquidity has been adversely impacted by our ongoing net losses, including as a result of declines in the sales of our legacy products while our next generation products are still under development and our ongoing SEC investigation, and there is no assurance that we will have sufficient liquidity to continue operations.” in this Quarterly Report on Form 10-Q for additional information.

Our cash balance as of October 31, ~~2019,~~2021, was approximately $17.5 million.

During the three months ended September 30, 2021, we ~~had~~issued and sold an aggregate of ~~$13.0 million principal and deferred accrued interest outstanding under the B. Riley Convertible Note.~~

Under the B. Riley Convertible Note, we have borrowed $12.0 million aggregate principal amount on a subordinated secured basis. Borrowings bear interest at 10% per year; interest amounts accrued and compounded into principal outstanding until October 2018, following which we are required to pay periodic interest in cash. The B. Riley Convertible Note matures on September 1, 2022. Borrowings under the B. Riley Convertible Note are secured by a subordinated lien on substantially all of our assets, subject to permitted liens. The principal amount of indebtedness under the B. Riley Convertible Note is convertible into2,555,788 shares of our common stock at ~~$8.87 per share. Between the first and second anniversary of the original issue date of the note, between the second and the~~

third anniversary of the original issue date of the note, following the third anniversary of the original issue date of the note and following the fourth anniversary of the original issue date of the note, B. Riley Principal Investments, LLC may elect to convert 75.0%, 50.0%, 25.0% and 12.5%,respectively, of the then-outstanding total principal amount and accrued interest outstanding under the note at the conversionan average price per share of ~~$8.87. We have the right to prepay amounts~~$4.0641 under the ~~B. Riley Convertible Note~~June 2021 ATM Program and the ATM Program for net proceeds of approximately $10.3 million of which approximately $9 million was received during the quarter and $1.3 million was received October 2021. Subsequent to September 30, 2021, we issued and sold an aggregate of 6,813,183 shares of our common stock at an average price per share of $2.10 under the ATM Program for net proceeds of approximately $14.3 million. As of October 31, 2021, we have approximately $24.8 million available for future issuances under the ATM Program. See “Recent Developments – ATM Program” for additional information.

The accompanying condensed consolidated financial statements have been prepared on a going concern basis which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The condensed consolidated financial statements do not include any time with a 2.0% prepayment fee if paid off before October 2019, a 1.0% prepayment fee if paid off between October 2019 and October 2020 and no prepayment fee thereafter. The prepayment fees are waived if the outstanding principal balance does not fall below $10.0 million following prepayment.

~~We maintain a credit line with EWB pursuant~~adjustments relating to the ~~Loan Agreement. In~~recoverability and classification of recorded asset amounts or the ~~future, we may borrow up to $8.0 million under~~amounts and classification of liabilities that might result from the ~~line~~outcome of ~~credit available under the Loan Agreement. As~~this uncertainty.

Summary of March 31, 2019, no amounts were outstanding under the Loan Agreement. Borrowings under the Loan Agreement bear interest at 1.0% plus the prime lending rate. Borrowings under the Loan Agreement are secured by a senior lien on substantially all of our assets, including inventoryCash Flows

Cash and receivables, subject to permitted liens. In the event of a default under the Loan Agreement, entities affiliated with B. Riley Financial and Investec Investments (UK) Limited, two of our stockholders, have the right to purchase the indebtedness under the Loan Agreement from EWB at par and to exercise remedies for the default, in their discretion, as the holders of the indebtedness.

The Loan Agreement contains certain negative and affirmative covenants as well as financial covenants, including covenants that restrict our ability to, among other things, incur or prepay indebtedness on subordinated debt, dispose of assets, engage in mergers and consolidations, make acquisitions or other investments, exceed annual capital expenditure limits, as defined, and make changes in the nature of the business. Objective events of default, therein, include, without limitation, nonpayment of principal, interest or other obligations, violation of the covenants, insolvency, and court-ordered judgments. Audited financial statements are required to be submitted to the lenders no later than 120 days after year end. In particular, we are required to maintain a minimum availability under the line of credit under the Loan Agreement of $750,000 and maintain a fixed charge coverage ratio, defined as the sum of Adjusted Covenant EBITDA plus capital expenditures minus taxes and dividends over fixed charges, of at least 1.05 to 1.00cash equivalents as of ~~the last of each month. In 2018, the financial covenants were amended to temporarily suspend the obligation to comply with the minimum fixed charge coverage ratio through~~ September 30, 2018, to increase the minimum fixed charge coverage ratio as of December 31, 2018, and for the last day of each month thereafter, from 1.00 to 1.10, and to increase the minimum excess availability to $1.2 million. In 2018, the financial covenants were amended to permanently remove the requirement to maintain positive Adjusted Covenant EBITDA. As a result, as of the quarter ended March 31, 2018, we were no longer subject to this Adjusted Covenant EBITDA financial covenant. As of March 31, 2019, we were in compliance with all of the financial covenants and there were no events of default associated during the year then ended.

While we did not have any borrowings outstanding under the Loan Agreement as of March 31, 2019, if we fail to comply with the covenants in the Loan Agreement, including the minimum fixed charge coverage ratio, and are unable to cure the covenant violation, we would be restricted from making future borrowings.

~~Net~~ ~~cash~~ ~~as of March 31, 2019,~~ 2021, was ~~$9.9~~$10.2 million, or ~~$3.1~~$11.9 million lower than net cash of ~~$13.0~~$22.1 million aton December 31, ~~2018.~~2020. The decrease was driven primarily ~~from cash used for operations, partially offset~~ by ~~proceeds from a private equity financing for common stock for an aggregate of $1.6 million that closed in January 2019.~~legal expenses and research and development.

The following table summarizes our sources and uses of cash for the periods presented:

For the ~~three~~nine months ended ~~March 31, 2019,~~September 30, 2021, cash used in operating activities was ~~$4.5~~$20.9 million, primarily attributable to net loss of ~~$6.2~~$26.9 million, partially offset by non-cash charges of $3.1 million and a net change in our net operating assets and liabilities of $2.9 million. Non-cash charges primarily consisted of $1.6 million in depreciation and amortization,$0.8 million in stock-based compensation expense and $0.7 million in allowance for bad debt. The change in our net operating assets and liabilities was primarily due to a net increase of $1.7 million in accounts and non-trade receivables, and a $0.5 million increase in prepaids and other assets, partially offset by a $3.7 million net increase in accounts payable, accrued expenses and warranty liability and a $1.4 million decrease in inventory.

For the nine months ended September 30, 2020, cash used in operating activities was $0.7 million, primarily attributable to net loss of $23.5 million, partially offset by a net change in our net operating assets and liabilities of ~~$1.4~~$18.5 million, and non-cash charges of ~~$0.3~~$4.3 million. Non-cash charges primarily consisted of ~~$0.5~~$2.3 million in depreciation and amortization, ~~partially offset by non-cash revenue of~~$0.8 million in stock compensation expense, $0.4 in inventory write-downs, $0.3 million ~~under our trade-in guarantee program.~~in bad debt expense $0.3 in non-cash interest expense and $0.2 million in accretion of debt discount. The change in our net operating assets and liabilities was primarily due to a ~~$11.4~~$4.3 million decrease in accounts receivables, ~~partially offset by~~ a ~~$7.2~~$6.3 million ~~increase~~decrease in inventory, ~~a $2.3~~and an increase of $7.6 million net increase ~~in prepaid expenses and other current assets, and a $0.6 million decrease~~ in accounts payable and accrued expenses.

For the three months ended March 31, 2018, cash used in operating activities was $4.7 million, primarily attributable to net loss of $5.1 million and a net change in our net operating assets and liabilities of $0.3 million, offset by non-cash charges of $0.7 million. Non-cash charges primarily consisted of $0.5 million in depreciation and amortization and non-cash interest of $0.2 million. The change in our net operating assets and liabilities was primarily due to a $2.9 million increase in accounts receivables, a $2.8 million increase in inventory, a $2.5 million increase in prepaid expenses and other current assets, and a $0.4 million decrease in deferred revenue, partially offset by a $8.2 million increase in accounts payable.

For the ~~three~~nine months ended ~~March 31, 2019,~~September 30, 2021, there was $0.02 million of cash used in investing activities.

For the nine months ended September 30, 2020, cash used in investing activities was $0.2 million attributable to ~~tooling development and purchases of software licenses of $0.1 million and~~ purchases of property and ~~equipment $0.1 million.~~

For the three months ended March 31, 2018, cash used in investing activities was $0.9 million, attributable to tooling development and purchases of software licenses of $0.8 million and purchases of property and equipment of $0.1 million.

For the ~~three~~nine months ended ~~March 31, 2019,~~September 30, 2021, cash provided by financing activities was $9.0 million, primarily ~~derived from the~~due to $9.0 in net proceeds from ~~a private equity financing of shares of common stock that closed in January 2019 for an aggregate of $1.6 million, partially~~our current and prior ATM Program, offset by ~~the net~~ repayment ~~on the line~~ of ~~credit of~~an outstanding debt obligation $0.1 ~~million.~~million to a supplier.

For the ~~three~~nine months ended ~~March 31, 2018,~~September 30, 2020, cash provided by financing activities was ~~$4.8~~$21.3 million, ~~attributable~~ primarily toderived from the net proceeds ~~from additional net borrowings under the B. Riley Convertible Note~~ of ~~$3.0~~our public offering of $25.2 million, and ~~additional of net proceeds on our lines of credit of $1.7 million.~~

As of March 31, 2019, we had an aggregate of $13.0 million principal and deferred accrued interest outstanding with B. Riley Convertible Note, refer to Note 5-Borrowings under Riley Loan section. No amounts were outstanding under the Loan Agreement with East West Bank, refer to Note 5- Borrowings under Senior Credit Agreement section.

~~Based on our current plans and market conditions, and proceeds~~ from the ~~IPO, we believe that our existing cash resources, and cash generated from operations, will be sufficient~~exercise of stock options of $0.3 million, partially offset by $4.1 million related to ~~satisfy our anticipated cash requirements for at least~~ the ~~next 12 months.~~

As of ~~March 31, 2019,~~September 30, 2021, we had ~~not entered into any~~no off-balance sheet arrangements and did not have any holdings in variable interest entities.

~~Item 3. Quantitative~~Critical Accounting Policies and ~~qualitative disclosures about market risk~~Significant Judgments and Estimates

~~We had cash~~Our discussion and ~~cash equivalents totaling $13.0 million~~analysis of financial condition and ~~$9.8 million as~~results of ~~March 31, 2019~~operations is based upon our condensed consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States of America. Certain accounting policies and December 31, 2018, respectively. We had no short-term investments as of March 31, 2019 and December 31, 2018. Our cash and cash equivalents consist of cash in bank accounts and money market funds. The primary objectivesestimates are particularly important to the understanding of our ~~investment activities are to preserve principal~~financial position and ~~provide liquidity without significantly increasing risk. We do not enter into investments for trading~~results of operations and require the application of significant judgment by our management or speculative purposes. Due to the nature of our cash and cash equivalents, a hypothetical 100 basis point change in interest rates would not have a material effect on the fair value of our portfolio. We therefore do not expect our operating results or cash flows tocan be materially affected by changes from period to period in economic factors or conditions that are outside of our control. As a ~~sudden change~~result, they are subject to an inherent degree of uncertainty. In applying these policies, our management uses their judgment to determine the appropriate assumptions to be used in the determination of certain estimates. Those estimates are based on our historical operations, our future business plans and projected financial results, the terms of existing contracts, our observance of trends in the industry, information provided by our customers and information available from other outside sources, as appropriate. While the nature of the COVID 19 situation is dynamic, we have considered its impact when developing our estimates and assumptions. Actual results and outcomes may differ from management's estimates and assumptions.

A description of our critical accounting policies that represent the more significant judgments and estimates used in the preparation of our consolidated financial statements was provided in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of our Annual Report on Form 10-K for the year ended December 31, 2020. There have been no changes to our critical accounting policies and estimates described in the Annual Report on Form 10-K for the year ended December 31, 2020, that have had a material impact on our condensed consolidated financial statements and related notes.

See Note 1 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for recently issued accounting pronouncements.

We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. We expect to use the extended transition period for any other new or revised accounting standards during the period in which we remain an emerging growth company. As a result, our condensed consolidated financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year following the fifth anniversary of the consummation of our initial public offering, (ii) the last day of the fiscal year in which we have total annual gross revenue of at least $1.07 billion, (iii) the last day of the fiscal year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which would occur if the market ~~interest rates.~~value of our common stock held by non-affiliates exceeded $700.0 million as of the last business day of the second fiscal quarter of such year, or (iv) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period. Even after we no longer qualify as an emerging growth company, we may still qualify as a smaller reporting company, which would allow us to take advantage of many of the same exemptions from disclosure requirements, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended, and reduced disclosure obligations regarding executive compensation in our prospectuses and in our periodic reports and proxy statements.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

(a) Evaluation of ~~disclosure controls~~Disclosure Controls and ~~procedures~~Procedures

Our management, with the participation of our ~~chief~~principal executive ~~officer~~ and ~~our chief~~ financial officer has evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, prior to filing this Quarterly Report on Form 10-Q. Based on this evaluation, and as a result of the ~~evaluation of~~material weakness in our ~~disclosure~~internal control over financial reporting described below, as well as our failure to include management’s report on internal controls ~~and procedures,~~in our ~~chief~~original Annual Report on Form 10-K for the year ended December 31, 2020, our principal executive ~~officer~~ and ~~chief~~ financial officer concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were not effective at the reasonable assurance level.

~~(b) Changes in~~As a public company, we are required to maintain internal control over financial reporting and to report any material weaknesses in those internal controls. With respect to the year ended December 31, 2020, we identified a material weakness in our internal controls over financial reporting related to the design and implementation of our IT general controls including elevated (administrator) access to financial reporting systems and subsystems. Although we have made progress with the remediation of these issues, these efforts may not be sufficient to avoid similar material weaknesses in the future.

In response to the conclusion set forth above, management intends to implement the remedial measures described in Management’s Report on Internal Control Over Financial Reporting in Part II, Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2020, as well as the following additional remedial measures:

There were no changes in our internal control over financial reporting that occurred during the quarter to which this report ~~related~~relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We have not experienced any material impact to our internal controls over financial reporting despite the fact that most of our employees are working remotely due to the COVID-19 pandemic. We are continually monitoring and assessing the impact of the COVID-19 pandemic on our internal controls to minimize the impact on their design and operating effectiveness.

In designing and evaluating disclosure controls and procedures, our management recognizes that any system of controls, however well designed and operated, can provide only reasonable assurance, and not absolute assurance, that the desired control objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals in all future circumstances. Accordingly, our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met and, as set forth above, our ~~chief~~principal executive officer and our ~~chief~~principal financial officer have concluded, based on their evaluation as of the end of the period covered by this quarterly report, that our disclosure controls and procedures were not effective to provide reasonable assurance that the objectives of our disclosure control system were met.

~~From time~~SeeNote 10 in this Quarterly Report on Form 10-Q for more information regarding legal proceedings.

With the exception of the following risk factors, there are no material changes to ~~time we~~the risk factors set forth in Part I, Item 1A, Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2020:

We have failed, and may continue to fail, to meet the listing standards of Nasdaq, and as a result our common stock may become ~~involved in legal proceedings or be subject to claims arising in~~delisted, which could have a material adverse effect on the ~~ordinary course~~liquidity of our ~~business.~~common stock.

Our common stock is currently listed for trading on the Nasdaq Capital Market. We ~~are not presently~~must satisfy Nasdaq’s continued listing requirements, including, among others, a ~~party to any legal proceedings that, if determined adversely to us,~~minimum stockholders’ equity of $2.5 million and a minimum bid price for our common stock of $1.00 per share, or risk possibly delisting, which would ~~individually or taken together~~ have a material adverse effect on our ~~business, revenues, financial condition or results~~business. On April 29, 2021, we received a letter from the Listing Qualifications staff of ~~operations. The results of any future litigation cannot be predicted with certainty and, regardless of~~Nasdaq indicating that, based upon the ~~outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management time and resources and other factors.~~

Investing in our securities involves a great deal of risk. Careful consideration should be made of the following factors as well as other information included in this Quarterly Report on Form 10-Q before deciding to purchase our securities. There are many risks that affect our business and results of operations, some of which are beyond our control. If any of the following risks actually occur, our business, financial condition or operating results could be significantly harmed. This could cause the tradingclosing bid price of our common stock for the prior 30 consecutive business days, we no longer met the requirement of the Nasdaq Capital Market to ~~decline,~~maintain a minimum bid price of $1 per share, as set forth in Nasdaq Listing Rule 5550(a). As discussed under “Recent Developments” included elsewhere in this report, on September 15, 2021, we effected a 1-for-10 Reverse Stock Split in order to regain compliance with the minimum bid price requirement and, ~~you may lose all or part of your investment. Additional risks~~on September 30, 2021, Nasdaq informed us that we had regained full compliance with Nasdaq’s continued listing requirements. However, there can be no assurance that we will be able to maintain compliance with Nasdaq’s continued listing requirements. If we do not ~~yet know~~maintain compliance with the Nasdaq continuing listing requirements, our common stock may be delisted from the Nasdaq Capital Market and it could be more difficult to buy or sell our securities and to obtain accurate quotations, and the price of our common stock could suffer a material decline. In addition, a delisting would impair our ability to raise capital through the public markets, could deter broker-dealers from making a market in or otherwise seeking or generating interest in our securities and might deter certain institutions and persons from investing in our securities at all.

Our unaudited condensed consolidated financial statements included a statement that there is a substantial doubt about our ability to continue as a going concern and a continuation of negative financial trends could result in our inability to continue as a going concern.

Our unaudited condensed consolidated financial statements as of and for the nine months ended September 30, 2021, were prepared on the assumption that we ~~currently think~~would continue as a going concern. Our unaudited condensed consolidated financial statements as of and for the nine months ended September 30, 2021, did not include any adjustments that might result from the outcome of this uncertainty. As a result of our ongoing net losses, there is substantial doubt about our ability to continue as a going concern over the next twelve months. The reaction of investors to our potential inability to continue as a going concern, could materially adversely affect the price of our common stock.

Additionally, if our projected operating results fail to improve, our liquidity could be further adversely impacted, and we may need to seek additional sources of funding. We are ~~immaterial may also affect~~actively pursuing expanding our business and ~~results of operations.~~

increasing our revenue opportunities while effectively managing business operations and exploring further cost saving opportunities. We ~~have not been profitable in recent years and~~ may not ~~achieve~~be successful in these efforts, in which case, we may need to seek to raise additional capital from the sale of equity securities or ~~maintain profitability~~the incurrence of indebtedness to allow us to invest in growth opportunities. There can be no assurance that additional financing will be available to us on acceptable terms, or at all. Additionally, if we continue to issue additional equity securities to raise funds, whether to existing investors or others, or through our ATM Program or otherwise, the ownership percentage of our existing stockholders would be reduced. New investors may demand rights, preferences, or privileges senior to those of existing holders of common stock. We may also be limited as to the amount of funds we can raise pursuant to SEC rules and the continued listing requirements of Nasdaq.

Our liquidity has been adversely impacted by our ongoing net losses, including as a result of declines in the ~~future.~~sales of our legacy products while our next generation products are still under development and our ongoing SEC investigation, and there is no assurance that we will have sufficient liquidity to continue operations.

We have incurred significant net losses since 2013 and have an accumulated deficit of ~~$149.7~~$223.1 million as of ~~March 31, 2019. While we have experienced stronger revenue growth~~September 30, 2021. In the nine months ended September 30, 2021, our liquidity has been further negatively impacted by a decline in ~~recent periods, we are not certain whether or when we will obtain a high enough volume of~~the sales of our legacy products ~~to sustain or increase~~while our growth or achieve or maintain profitability in the future. We also expect our costs to increase in future periods, which could negatively impact our future operating results if our revenues do not increase.next generation products are still under development. In ~~particular, we expect to continue to expend substantial financial and other resources on:~~

~~These investments may not result~~next-generation products or the cost efficiencies implemented in increased revenues or growth in our business. Additionally, we may encounter unforeseen operating expenses, difficulties, complications, delays and other unknown factors that may result in losses in future periods.2020. If we are unable to ~~increase our revenues at a rate sufficient~~generate or obtain the requisite amount of financing needed to ~~offset the expected increase in our costs,~~fund our business ~~operating results~~operations, our liquidity and ~~financial position may be harmed, and we may not be able~~ability to ~~achieve or maintain profitability over the long term.~~

We rely on our channel partners to generate a substantial majority of our revenues. If these channel partners fail to perform or if we cannot enter into agreements with channel partners on favorable terms, our operating resultscontinue operations could be ~~significantly harmed.~~

A substantial majority of our revenues are generated through sales by our channel partners, which are primarily wireless carriers who sell our phones through their sales channels. To the extent our channel partners are unsuccessful in selling or do not promote our products, or we are unable to obtain and retain a sufficient number of high-quality channel partners, our business and operating results could be significantly harmed. We enter into master sales arrangements with the majority of our channel partners (including channel partners contributing over 90% of our total revenues for the three months ended March 31, 2019 and for the year ended December 31, 2018 under which our partners purchase our products for distribution on a purchase order basis.

We enter into master sales arrangements with the majority of our channel partners (including channel partners contributing over 90% of our total revenues for the year ended December 31, 2018) under which our partners purchase our products for distribution on a purchase order basis. While these arrangements are typically long term, they generally do not contain any firm purchase volume commitments.materially adversely affected. As a result, our channel partners are not contractually obligated to purchase from us any minimum number of products. We are generally required to satisfy any and all purchase orders delivered to us within specified delivery windows, with limited exceptions (such as orders significantly in excess of forecasts). If we are unable to efficiently manage our supply and satisfy purchase orders on a timely basis to our channel partners, we may be in breach of our sales arrangements and lose potential sales. Our sales arrangements also generally include technical performance standards for our mobile phones and accessories sold, which vary by

channel partner. If a technical issue with any of our covered products exceeds certain preset failure thresholds for the relevant performance standard or standards, the channel partner typically has the right to cease selling the product, cancel open purchase orders and levy certain monetary penalties. If our products suffer technical issues or failures following sales to our channel partners, we may be subject to significant monetary penalties and our channel partners may cease making purchase orders, which would significantly harm our business and results of operations. In addition, our channel partners retain sole discretion in which of their stocked products to offer their customers. While we may offer limited customer incentives, we generally have limited to no control over which products our channel partners decide to offer or promote, which directly impacts the number of products that our partners will purchase from us.

Our channel partners may be unsuccessful in marketing, selling and supporting our solutions. They may also market, sell and support solutions that are competitive with ours, and may devote more resources to the marketing, sales and support of such products. They may have incentives to promote our competitors’ products in lieu of our products, particularly for our competitors with larger volumes of orders, more diverse product offerings and a longer relationship with our channel partners. As a result, our channel partners may stop selling our products completely. While we employ a small direct sales force, our channel partners have significantly larger sales teams who are not contractually obligated to promote any of our devices and often have multiple competing devices in stock to offer their customers. In addition, downstream sales by our channel partners often succeed due to attractive device prices and monthly rate plans, which we do not control. In certain cases, we may promote our own devices through customer incentives, typically in exchange for retail price reductions or contributions of funds for marketing purposes; however, there can be no assurance that any such incentives would contribute to increased purchases of our products. Further, given the impact of attractive pricing on ultimate sales, we generally must offer increased promotional funding or price reductions for our more expensive products. This promotional funding or price reductions operate to reduce our margins and significantly impact our profitability.

New sales channel partners may take several months or more to achieve significant sales. Our channel partner sales structure could subject us to lawsuits, potential liability and reputational harm if, for example, any of our channel partners misrepresents the functionality of our products or services to their customers, or violate laws or our corporate policies. Additionally, some of our master agreements with our wireless carrier customers contain most “favored nation” clauses. These clauses typically provide that if we enter into an agreement with another wireless carrier or customer on more favorable terms, we must offer some of those terms to our existing wireless carrier customers. These provisions may obligate us to provide different, more favorable, terms to our existing wireless carrier customers, which could, if applied, result in lower revenues or otherwise adversely impact our business, financial condition and results of operations.

If we fail to effectively manage our existing or future sales channel partners, our channel partners fail to promote our products effectively, we are unable to meet our obligations under our sales arrangements or future agreements that we may enter into with wireless carrier customers have terms that are more favorable to the customer, our business and results of operations would be harmed.

We are materially dependent on the adoption of our solutions by both the industrial enterprise and public sector markets, and if end customers in those markets do not purchase our solutions, our revenues will be adversely impacted, and we may not be able to expand into other markets.

Our revenues have been primarily in the industrial enterprise market, and we are materially dependent on the adoption of our solutions by both the industrial enterprise and public sector markets. End customers in the public sector market may remain, for reasons outside our control, tied to LMR solutions or other competitive alternatives to our phones. Sales of our products to these buyers may also be delayed or limited by these competitive conditions. If our products are not widely accepted by buyers in those markets, we may not be able to expand sales of our products into new markets, and our business, results of operations and financial condition may be adversely impacted.

We participate in a competitive industry, which may become more competitive. Competitors with greater resources and significant experience in high-volume product manufacturing may be able to respond more quickly and cost-effectively than we can to new or emerging technologies and changes in customer requirements.

We face significant competition in developing and selling our solutions. Our primary competitors in the non-rugged mobile device market include Apple Inc. and Samsung Electronics Co. Ltd. Our primary competitors in the rugged mobile device market include Bullitt Mobile Ltd. and Kyocera Corporation. We also face competition from large system integrators and manufacturers of private and public wireless network equipment and devices. Competitors in this space include Harris Corporation, JVC KENWOOD Corporation, Motorola Solutions, Inc., or MSI, and Tait International Limited. For the Data Capture and RFID portion of our product offerings, competitors include companies that provide a broad portfolio of barcode scanning products that are suitable for the majority of global market applications, such as Datalogic USA, Inc., Honeywell International Inc., Panasonic Corporation and Zebra Technologies Corporation.

We cannot assure we will be able to compete successfully against current or future competitors. Increased competition in mobile computing platforms, data capture products, or related accessories and software developments may result in price reductions, lower gross profit margins, and loss of market share, and could require increased spending on research and development, sales and marketing, and customer support. Some competitors may make strategic acquisitions or establish cooperative relationships with suppliers or companies that produce complementary products, which may create additional pressures on our competitive position in the marketplace.

Most of our competitors have longer operating histories, greater name recognition, larger customer bases and significantly greater financial, technical, sales, marketing and other resources and experience than we do. In addition, because of the higher volume of components that many of our competitors purchase from their suppliers, they are able to keep their supply costs relatively low and, as a result, may be able to recognize higher margins on their product sales than we do. Many of our competitors may also have existing relationships with the channel partners who we use to sell our products, or with our potential customers. This competition may result in reduced prices, reduced margins and longer sales cycles for our products. Our competitors may also be able to more quickly and cost-effectively respond to new or emerging technologies and changes in customer requirements. The combination of brand strength, extensive distribution channels and financial resources of the larger vendors could cause us to lose market share and could reduce our margins on our products. If any of our larger competitors were to commit greater technical, sales, marketing and other resources to our markets, our ability to compete would be adversely impacted. If we are unable to successfully compete with our competitors, our sales would suffer and as a result our financial condition will be adversely impacted.

~~Defects in our products could reduce demand for our products and result in a loss of sales, delay in market acceptance and injury to our reputation, which would adversely impact our business.~~

Complex software, components and assemblies used in our products may contain undetected defects that are subsequently discovered at any point in the life of the product. For example, in 2018, we recalled one batch of our XP8 devices from two wireless carriers due to manufacturing defects. Defects in our products may result in a loss of sales, delay in market acceptance and injury to our reputation and increased warranty costs.

Additionally, our software may contain undetected errors, defects or bugs. Although we have not suffered significant harm from any errors, defects or bugs to date, we may discover significant errors, defects, or bugs in the future that we may not be able to correct or correct in a timely manner. It is possible that errors, defects or bugs will be found in our existing or future software products and related services with the potential for delays in, or loss of market acceptance of, our products and services, diversion of our resources, injury to our reputation, increased service and warranty expenses, and payment of damages.

Further, errors, defects or bugs in our solutions could be exploited by hackers or could otherwise result in an actual or perceived breach of our information systems. Alleviating any of these problems could require significant expense and could cause interruptions, delays or cessation of our product licensing, which would reduce demand for our products and result in a loss of sales, delay in market acceptance and injure our reputation and could adversely impact our business, results of operations and financial condition.

~~If our business does not grow as we expect, or if we fail to manage our growth effectively, our operating results and business would suffer.~~

~~Our ability to successfully grow our business depends on a number of factors including our ability to:~~

As usage of our solutions grows, we will need to continue to make investments to develop and implement new or updated solutions, technologies, security features and cloud-based infrastructure operations. In addition, we will need to appropriately scale our internal business systems and our services organization, including the suppliers of our detection equipment and customer support services, to serve our growing customer base. Any failure of, or delay in, these efforts could impair the performance of our solutions and reduce customer satisfaction.

Further, our growth could increase quickly and place a strain on our managerial, operational, financial and other resources, and our future operating results depend to a large extent on our ability to successfully manage our anticipated expansion and growth. To manage our growth successfully, we will need to continue to invest in sales and marketing, research and development, and general and administrative functions and other areas. We are likely to recognize the costs associated with these investments earlier than receiving some of the anticipated benefits, and the return on these investments may be lower, or may develop more slowly, than we expect, which could adversely impact our operating results.

If we are unable to manage our growth effectively, we may not be able to take advantage of market opportunities or develop new solutions or upgrades to our existing solutions, satisfy customer requirements, maintain the quality and security of our solutions or execute on our business plan, any of which could harm our business, operating results and financial condition.

We are required to undergo a lengthy customization and certification process for each wireless carrier customer, which increases our operating expenses, and failure to obtain such certification would adversely impact our results of operations and financial condition.

Each wireless carrier requires each of our devices to complete a thorough technical acceptance process before it can be stocked and sold. Such acceptance processes impose rigorous and complex requirements on our devices, which result in a lengthy testing and certification process, during which we incur substantial operating expenses related to the wireless carrier’s technical acceptance of our devices. The acceptance processes and related costs to us vary across carrier customers depending on carrier size and level of customization required. Generally, the certification process commences within one to three months of product concept development. During this development stage, certain carriers provide a technology roadmap and target demographics, allowing us to define product specifications to meet carrier goals, while other carriers provide defined specifications and preferred price points. Once we receive approval of a product concept by the carrier, we and the carrier advance the product to the development stage. When the product is close to being a functioning model, we commence internal quality assurance processes and field testing, which may include third-party lab testing, in-market field testing and interoperability testing. Finally, as the last step in the testing phase, the wireless carrier typically conducts testing itself, following which the product may be certified and stocked. The entire process can last from six to 18 months depending on the particular wireless carrier and type of device. Any delay in the acceptance process or failure to satisfy the device certification requirements would affect our ability to bring products to market and adversely impacts our results of operations and financial condition.

If we fail to adequately forecast demand for our inventory and supply needs, we could incur additional costs or experience manufacturing delays, which could reduce our gross margin or cause us to delay or even lose sales.

Because our production volumes are based on a forecast of channel partner demand rather than purchase commitments from our major customers, there is a risk that our forecasts could be inaccurate and that we will be unable to sell our products at the volumes and prices we expect, which may result in excess inventory. We provide, and will continue to provide, forecasts of our demand to our third-party suppliers prior to the scheduled delivery of products to our channel partners. If we overestimate our requirements, our contract manufacturers may have excess component inventory, which could increase our costs. If we underestimate our requirements, our contract manufacturers may have inadequate component inventory, which could interrupt the manufacturing of our products and result in delays in shipments and revenues or even lost sales, or could incur unplanned overtime costs to meet our requirements, resulting in significant cost increases. For example, certain materials and components used to manufacture our products may reach end of life during any of our product’s life cycles, following which suppliers no longer provide such expired materials and components. This would require us to either source and qualify an alternative component, which could require a re-certification of the device by the wireless carriers and/or regulatory agencies, or forecast product demand for a final purchase of such materials and components that may reach end of life to ensure that we have sufficient product inventory through a product’s life cycle. If we overestimate forecasted demand, we would hold excess end-of-life materials and components resulting in increased costs. If we underestimate forecasted demand, we could experience delays in shipments and loss of revenues.

~~In addition, if we underestimate our requirements and the applicable supplier becomes insolvent or is no longer able to timely supply our needs in a cost-efficient manner or at all,~~ we may be required to ~~acquire components, which~~delay, reduce or cease our operations and we may ~~need to~~ be ~~customized for our products, from alternative suppliers, including at significantly higher costs. For example, in 2018, one of our suppliers became insolvent and ceased all production, requiring us~~required to seek alternative supply of complex components in a very short time frame. If we cannot source alternative suppliers and/or alternative components, we may suffer delays in shipments or lost sales. Similarly, credit constraints at our suppliers could require us to accelerate payment of our accounts payable, impacting our cash flow. Further, lead times for materials and components that we order vary significantly and depend on factors such as the specific supplier, contract terms, customization needed for any particular component and demand for each component at a given time. Any such failure to accurately forecast demand and manufacturing and supply requirements, and any need to obtain alternative supply sources, could materially harm our business, results of operations and financial condition.bankruptcy protection.

We may not be able to continue to develop solutions to address user needs effectively, ~~in an industry characterized by ongoing change~~including our next generation products, which would materially adversely affect our liquidity and ~~rapid technological advances.~~

~~To be successful, we must adapt~~our ability to ~~rapidly changing technological and application needs by continually improving our products, as well as introducing new products and services, to address user demands.~~continue operations.

~~Future~~Technological advancements could render our products obsolete, which typically erodes prices and causes products to become unmarketable. Our success will depend on our ability to ~~effectively~~respond to changing technologies and ~~economically adapt~~customer requirements, and our ability to develop and introduce new and enhanced products in ~~this evolving environment. We~~a cost-effective and timely manner. For example, our products are compatible with fourth generation, or 4G, technology, but emerging fifth generation wireless, or 5G, technology is expected to require network infrastructure upgrades, which could ~~incur substantial costs if~~require us to update and migrate all of our systems from 4G to 5G. In addition, several of our legacy products are nearing or have reached the end of their product lifecycle and are becoming obsolete due to technological advancements and ongoing change in the industry. As a result, we ~~must modify our business~~have experienced significant declines in revenue in recent quarters due to ~~adapt to~~a drop in the number of unit sales of these ~~changes, and may even be unable to adapt to these changes.~~

Inlegacy handheld devices. For example, during the ~~three~~nine months ended ~~March 31, 2019 and 2018, approximately 82% and 77%~~September 30, 2021, the number of unit sales of our ~~revenues, respectively, were derived from our top five customers. We expect our revenues~~legacy rugged handheld devices decreased by 79,699, or 39%, compared to ~~continue to be heavily concentrated among our top customers, and~~ the ~~loss of, or significant reduction in orders from, any of these customers could significantly reduce our revenues and adversely impact our operating results.~~

~~Historically, our revenues have been concentrated among a very small number of customers. In the three~~nine months ended March 31, 2019 and 2018, our top five wireless carriers customers accounted for approximately 82% and 77% of our revenues, respectively. In 2018, three of the four largest U.S. wireless carriers, and the three largest Canadian wireless carriers, began stocking our entire next generation product portfolio for the first time in our history following their certification of our products, resulting in significant revenue concentration among these few carriers. In addition to the certification and stocking of our products by these wireless carriers, revenue increased among such wireless carriersSeptember 30, 2020, primarily as a result of ~~increases in awareness~~these products reaching the end of ~~our brand among end users and end customers over the past several years, new~~their product launches and an increased focus by carriers such as AT&T and Verizon on dedicated public safety networks, including FirstNet. We expect our revenues to remain heavily concentrated among these top wireless carriers, and we will be substantially dependent on these wireless carriers continuing to purchase and promote our products to their sales channels as well as customer demand for devices and services from these wireless carriers (factors over which we do not have any control). The loss of one or more of these significant customers, or reduced demand or purchases from these significant customers, would result in significant harm to our revenues and results of operation, and our growth could be limited.lifecycle.

~~The markets for our devices and related accessories may not develop as quickly as we expect, or may not develop at all.~~

Our future success is substantially dependent upon continued adoption of devices and related accessories in the industrial enterprise and public sector markets, including the transition from LMR and PTT, to smartphone and LTE networks. These market developments and transitions may take longer than we expect or may not occur at all, and may not be as widespread as we expect. If the market does not develop as we expect, our business, operating results and financial condition would be significantly harmed.

~~Our dependence on third-party suppliers for key components of our products could delay shipment of our products and reduce our sales.~~

We depend on certain suppliers for the delivery of components used in the assembly of our products, including machined parts, injection molded plastic parts, printed circuit boards and other miscellaneous custom parts for our products. Our reliance on third-party suppliers creates risks related to our potential inability to obtain an adequate supply of components and reduced control over pricing and timing of delivery of components. In particular, we have little to no control over the prices at which our suppliers sell materials and components to us. Certain supplies of our components are available only from a single source or limited sources and we may not be able to diversify sources in a timely manner. We have experienced shortages in the past that have negatively impacted our results of operations and may experience such shortages in the future. For example, in 2018, we experienced a shortage in supply of a camera part from one of our suppliers for our XP8 phone, which resulted in delays in delivery of completed XP8 phones to certain of our channel partners.

We also do not have long-term supply agreements with any of our suppliers. Our current contracts with certain suppliers may be canceled or not extended by such suppliers and, therefore, do not afford us with sufficient protection against a reduction or interruption in supplies. Moreover, in the event any of these suppliers breach their contracts with us, our legal remedies associated with such a breach may be insufficient to compensate us for any damages we may suffer.

Any interruption of supply for any material components of our products, or inability to obtain required components from our third-party suppliers, could significantly delay the production and shipment of our products and harm our revenues, profitability and financial condition.

Our future success is dependent on our ability to create independent brand awareness for our company and products with end customers, and our inability to achieve such brand awareness could limit our prospects.

We depend on a small number of wireless carriers to distribute our products. While we intend to ramp up direct marketing and end-customer brand awareness initiatives in the future, our sales and marketing efforts have historically been predominantly focused on channel partners. As such, our operating expenses related to end-customer marketing efforts have historically been very small, representing less than 1.0% of our total sales and marketing expenses during the three months ended March 31, 2019, and for the fiscal year 2018. To increase end-customer brand awareness, we intend to develop sales tools for key verticals within are target markets, increase usage of social media and expand product training efforts, among other things. As a result, we ~~expect~~are currently prioritizing spending on research and development of our ~~sales and marketing expenses to increase~~next generation ruggedized mobile phones, which we currently anticipate launching in the ~~future, primarily from increased sales personnel expenses, which~~third quarter of 2021. However, the research and development necessary to launch our next generation products will require us to ~~cost-efficiently ramp up~~incur additional costs and our ~~sales and marketing capabilities and effectively target end customers. However, there~~liquidity continues to be adversely impacted by our ongoing net losses. There can be no assurance that we will ~~successfully increase our brand awareness or do so in a cost-efficient manner while maintaining market share within our existing sales channels. Our failure~~have sufficient resources to ~~establish stand-alone brand awareness with end customers~~complete the development of our ~~products will leave us vulnerable~~next generation ruggedized mobile phones and bring them to market. Even if we are able to introduce our next generation ruggedized mobile phones to the ~~marketing and selling success of others, including our channel partners, and~~market, there can be no assurance that these ~~developments could have an adverse impact on our prospects.~~new product introductions will lead to any sales or increase in revenue. If we ~~are unable~~fail to ~~significantly increase~~develop these next generation products or enhancements on a timely and cost-effective basis, or if our new products or enhancements fail to achieve market acceptance, our business, operations, financial condition and liquidity would be further materially adversely affected and we may be required to delay, reduce or cease our operations and we may be required to seek bankruptcy protection. See above under “Our liquidity has been adversely impacted by our ongoing net losses, including as a result of declines in the ~~awareness of our brand and solutions with end customers in a cost-efficient manner, we will remain significantly dependent on our channel partners for~~ sales of our legacy products while our next generation products are still under development and our ongoing SEC investigation, and there is no assurance that we will have sufficient liquidity to continue operations.”

Further, the development of new or enhanced products is a complex and uncertain process requiring the accurate anticipation of technological and market trends. We may experience design, manufacturing, marketing, and other difficulties that could delay or

prevent the development, introduction or marketing of our new products and enhancements. If we experience delays with new products, if our expectations regarding market demand and direction are incorrect, if sales of our existing products begin to decline more rapidly, or if the rate of decline continues to exceed the rate of growth of our next generation products, it will materially and adversely affect our business, results of operations and financial condition, and ~~results of operations could be adversely impacted.~~may require us to significantly reduce or even eliminate certain research and development programs.

We are dependent on the continued services and performance of a concentrated and limited group of senior management and other key personnel, the loss of any of whom could adversely impact our business.

Our future success depends in large part on the continued contributions of a concentrated and limited group of senior management and other key personnel. ~~In particular, the leadership~~As previously disclosed, beginning in 2021, we outsourced substantially all of ~~key~~our software development and manufacturing work to third parties and, as part of these outsourcings, we transferred or eliminated a significant number of employees. As of September 30, 2021, our worldwide employee headcount was 78 employees, down from 317 employees at December 31, 2020, and 500 employees at December 31, 2019. Our senior management ~~personnel~~team is ~~critical~~also small, with Mr. Robert Tirva serving as our President, Chief Operating Officer and Chief Financial Officer as of May 31, 2021. We currently have no Chief Executive Officer.

Due to the ~~successful management~~small size of our ~~company, the development of our solutions~~Company and our ~~strategic direction. We also depend on the contributions~~limited number of ~~key technical personnel.~~

~~We maintain “key person” insurance only for our Chief Executive Officer and do not maintain such insurance for any other~~employees, each member of our ~~senior management team or any of our~~executives, managers and other key ~~employees. Our senior management and key~~ personnel ~~are all employed on an at-will basis, which means that they could terminate their employment with us at any time, for any reason and without notice. The loss of any of~~serve a critical role to our ~~key personnel could significantly delay or prevent the achievement of our development and strategic objectives and harm our business.~~

~~We compete in a rapidly evolving market, and the failure to respond quickly and effectively to changing market requirements could cause our business and operating results to decline.~~

The mobile device market is characterized by rapidly changing technology, changing customer needs, evolving industry standards and frequent introductions of new products and services. In order to deliver a competitive mobile device, our solutions must be capable of operating in an increasingly complex network environment. As new wireless phones are introduced and standards in the mobile device market evolve, we may be required to modify our phones and services to make them compatible with these new products and standards. Likewise, if our competitors introduce new devices and services that compete with ours, we may be required to reposition our solutions or introduce new phones and solutions in response to such competitive pressure. We may not be successful in modifying our current phones or introducing new ones in a timely or appropriately responsive manner, or at all. If we fail to address these changes successfully, our business and operating results could be significantly harmed.

~~If dedicated public safety LTE networks are not deployed at the rate we anticipate or at all, demand for our solutions may not grow as expected.~~

A key part of our strategy is to further expand the use of our solutions over dedicated LTE networks in the public safety market. If the deployment of dedicated LTE networks is delayed or such networks are not adopted at the rate we anticipate, demand for our solutions may not develop as we anticipate, which would have a negative effect on our revenues.

success. If we are unable to ~~sell~~retain sufficiently experienced and capable employees, including those who can help us increase revenues generated from our ~~solutions into new markets,~~end market segments, our ~~revenues~~business and financial results may ~~not grow.~~

~~Any new market into which~~suffer. The loss of the services of any additional executives, managers or other key personnel could impede the achievement of our strategic objectives, seriously harm our ability to successfully implement our business strategy and adversely impact our operating results. In addition, if additional executives, managers or other key personnel resign, retire or are terminated, or their service is otherwise interrupted, including due to COVID-19, we ~~attempt to sell our solutions~~ may not be ~~receptive. Our ability~~able to ~~penetrate new markets depends on~~replace them in a timely manner and we could experience significant declines in productivity and/or errors due to insufficient staffing or managerial oversight. Moreover, experienced and capable employees in the ~~quality of our solutions, the continued adoption of our public safety solution by first responders, the perceived value of our solutions as a risk management tool~~technology industry remain in high demand, and ~~our ability to design our solutions to meet the demands of our customers. If the markets for our solutions do not develop as we expect, our revenues may not grow.~~

Our ability to successfully face these challenges depends on several factors, including increasing the awareness of our solutions and their benefits, the effectiveness of our marketing programs, the costs of our solutions, our ability to attract, retain and effectively train sales and marketing personnel, and our ability to develop relationships with wireless carriers and other partners. If we are unsuccessful in developing and marketing our solutions into new markets, new markets for our solutions might not develop or might develop more slowly than we expect, either of which would harm our revenues and growth prospects.

~~If we are unable to attract, integrate and retain additional qualified personnel, including top technical talent, our business could be adversely impacted.~~

~~Our future success depends in part on our ability to identify, attract, integrate and retain highly skilled technical, managerial, sales and other personnel. We face intense~~there is continual competition for ~~qualified individuals from numerous other companies, including other software and technology companies, many of whom have greater financial and other resources than~~their talents. Given our size, we ~~do. Some of these characteristics~~ may be more appealing to high-quality candidates than those we have to offer. In addition, new hires often require significant training and, in many cases, take significant time before they achieve full productivity. We may incur significant costs to attract and retain qualified personnel, including significant expenditures related to salaries and benefits and compensation expenses related to equity awards, and we may lose new employeesat a disadvantage, relative to our larger competitors, ~~or other companies before we realize~~in the ~~benefit~~competition for these personnel.

We cannot assure you that our exploration of ~~our investment in recruiting~~strategic and training them. Moreover, new employees may not be or become as productive as we expect, as we may face challenges in adequately or appropriately integrating them into our workforce and culture. If we are unable to attract, integrate and retain suitably qualified individuals who are capable of meeting our growing technical, operational and managerial requirements on a timely basis or at all, our businessfinancing alternatives will ~~be adversely impacted.~~

Volatility or lack of positive performance in our stock price may also affect our ability to attract and retain our key employees. Many of our senior management personnel and other key employees have become, or will soon become, vestedresult in a ~~substantial amount of stock~~ transaction and/or ~~stock options. Employees may be more likely to leave us if the shares they own~~financing or ~~the shares underlying their vested options have significantly appreciated in value relative to the original purchase prices of the shares~~that any such transaction or the exercise prices of the options, or, conversely, if the exercise prices of the options that they hold are significantly above the market price of our common stock. If we are unable to appropriately incentivize and retain our employees through equity compensation, or if we need to increase our compensation expenses in order to appropriately incentivize and retain our employees, our business, operating results and financial conditionfinancing would be ~~adversely impacted.~~

~~Our existing IT systems may not be adequate to manage our growth, and our implementation of updated IT systems could result in significant disruptions to our operations.~~

Our existing IT systems may be inadequate to manage our growth, and we are planning to implement various upgrades to our enterprise resource planning, or ERP, systems, as well as other complementary IT systems, over the next several years. Implementation of these solutions and systems is highly dependent on coordination of numerous software and system providers and internal business teams. The interdependence of these solutions and systems is a significant risk to the successful, ~~completion of the initiatives~~ and the ~~failure~~process of ~~any one system could have a significant adverse impact on the implementation of our overall IT infrastructure. We may experience difficulties as we transition to these new~~exploring strategic and financing alternatives or upgraded systems and processes, including loss or corruption of data, delayed shipments, decreases in productivity as our personnel and third-party providers implement and become familiar with new systems, increased costs and lost revenues.

In addition, transitioning to these new systems requires significant capital investments and personnel resources. Difficulties in implementing new or upgraded information systems or significant system failures could disrupt our operations and have a significant adverse impact on our capital resources, financial condition, results of operations or cash flows. Implementation of this new IT infrastructure has a significant impact on our business processes and information systems across a significant portion of our operations. As a result, we will be undergoing significant changes in our operational processes and internal controls as our implementation progresses, which in turn will require significant change management, including recruiting and training of qualified personnel. If we are unable to successfully manage these changes as we implement these systems, including harmonizing our systems, data, processes and reporting analytics, our ability to conduct, manage and control routine business functions could be negatively affected and significant disruptions to our business could occur. In addition, we could incur material unanticipated expenses, including additional costs of implementation or costs of conducting business. These risks could result in significant business disruptions or divert management’s attention from key strategic initiatives and have a significant adverse impact on our capital resources, financial condition and results of operations.

~~The application development ecosystem supporting our devices and related accessories is new and evolving.~~

The application development ecosystem supporting our devices and related accessories is new and evolving. Specifically, the number of application developers in the ecosystem supporting our devices and accessories is small. If the market or the application development ecosystem does not develop, timely or at all, demand for our products may be limited, and our business and results of operations will be significantly harmed.

~~Our business is difficult to evaluate because we have a limited operating history in our markets.~~

We have a limited operating history based on which you can evaluate our present business and future prospects. For example, in March 2018, we launched our XP5s and XP8 phones in the public safety market and also have limited operating history in the industrial enterprise market. Because of this limited operating history, we face challenges in predicting our business and evaluating its prospects. These challenges present risks and uncertainties relating to our ability to implement our business plan successfully. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by newly-public companies that have recently launched a new product into a new market. If we are unsuccessful in addressing these risks and uncertainties, our business, results of operations and financial condition will be significantly harmed.

The impact of potential changes in customs, tariffs, and trade policies in the United States and the potential corresponding actions by other countries, including recent trade initiatives announced by the U.S. presidential administration against China, in which we do businessconclusion could adversely impact our ~~financial performance.~~business and our stock price.

There can be no assurances that the strategic and financing alternatives process will result in the announcement or consummation of any strategic or financing transaction, or that any resulting plans or transactions will yield additional value for shareholders. Any potential transaction would be dependent on a number of factors that may be beyond our control, including, among other things, market conditions, industry trends, the interest of third parties in any potential transaction with the Company.

The U.S. government has made proposals that are intended to address trade imbalances, which include encouraging increased production in the United States. These proposals could result in increased customs dutiesprocess of exploring strategic and tariffs, and the renegotiation of some U.S. trade agreements. We import a significant percentage of our products into the United States, and an increase in customs duties and tariffs with respect to these imports could negatively impact our financial performance. If such customs duties and tariffs are implemented, it also may cause U.S. trading partners to take actions with respect to U.S. imports or U.S. investment activities in their respective countries. Any potential changes in trade policies in the United States and the potential corresponding actions by other countries in which we do businessalternatives could adversely impact ~~our financial performance. Given the level of uncertainty over which provisions will be enacted, we cannot predict with certainty the impact of the proposals.~~

For example, in 2018, the U.S. presidential administration and Chinese government imposed significant tariffs on exports between the two countries. This evolving policy dispute between China and the United States is likely to have significant impact on the industries in which we participate, directly and indirectly, and no assurance can be given that any individual customer or significant groups of companies or a particular industry, will not be adversely impacted by any governmental actions taken by either China or the United States. In addition, we manufacture our mobile phones at our facility in Shenzhen, China, which could result in significant additional costs to us when shipping our products to various customers in the United States. It is not possible to predict with any certainty the outcome of the trade dispute between the United States and China, and prolonged or increased tariffs on imports from China to the United States would adversely impact our business, results of operations and financial condition.

~~Operating outside of the United States presents specific risks to our business, and we have substantial operations outside of the United States.~~

Most of our employee base and operations are located outside the United States, primarily in China and India. Most of our software development, third-party contract manufacturing, and product assembly operations are conducted outside the United States.

~~Our failure to manage any of these risks successfully could harm our international operations and adversely impact our business, operating results and financial condition.~~

A security breach or other significant disruption of our IT systems or those of our partners, suppliers or manufacturers, caused by cyberattacks or other means, could have a negative impact on our operations, sales, and operating results.

All IT systems are potentially vulnerable to damage, unauthorized access or interruption from a variety of sources, including but not limited to, cyberattacks, cyber intrusions, computer viruses, security breaches, energy blackouts, natural disasters, terrorism, sabotage, war, insider trading and telecommunication failures. A cyberattack or other significant disruption involving our IT systems or those of our outsource partners, suppliers or manufacturers could result in the unauthorized release of proprietary, confidential or sensitive information of ours or result in virus and malware installation on our devices. Such unauthorized access to, or release of, this information or other security breaches could: (i) allow others to unfairly compete with us, (ii) compromise safety or security, (iii) subject us to claims for breach of contract, tort, and other civil claims, and (iv) damage our reputation. Any or all of the foregoing could have a negative impact on our business, financial condition and results of operations.

We ~~experience lengthy sales cycles for our products and the delay of an expected large order~~ could ~~result in a significant unexpected revenue shortfall.~~

The purchase of our products is often an enterprise-wide decision for prospective customers, which requires us to engage in sales efforts over an extended period of time and provide a significant level of education to prospective customers regarding the uses and benefits of such devices. Prospective customers, especially the wireless carriers that sell our products, often undertake a prolonged evaluation process that may take from several months to several years in certain cases. Consequently, if our forecasted sales from a specific customer are not realized, we may not be able to generate revenues from alternative sources in time to compensate for the shortfall. The loss or delay of an expected large order could also result in a significant unexpected revenue shortfall. Moreover, to the extent we enter into and deliver our products pursuant to significant contracts earlier than we expected, our operating results for subsequent periods may fall below expectations. We may spendincur substantial ~~time, effort and money on our sales and marketing efforts without any assurance that our efforts will produce any sales. If we are unable to succeed in closing sales~~expenses associated with ~~new and existing customers, our business, operating results and financial condition will be harmed.~~

We may require additional capital to fund our business and support our growth, and our inability to generate and obtain such capital on acceptable terms, or at all, could harm our business, operating results, financial condition and prospects.

We intend to continue to make substantial investments to fund our business and support our growth. In addition, we may require additional funds to respond to business challenges, including the need to develop new features or enhance our solutions, improve our operating infrastructure or acquire or develop complementary businesses and technologies. As a result, in addition to the revenues we generate from our business, we may need to engage in additional equity or debt financings to provide the funds required for these and other business endeavors. If we raise additional funds through future issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock. Any debt financing that we may secure in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. We may not be able to obtain such

additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly impaired, and our business may be adversely impacted. In addition, our inability to generate or obtain the financial resources needed may require us to delay, scale back, or eliminate some or all of our operations, which may have a significant adverse impact on our business, operating results and financial condition.

~~We have a limited history of high-volume commercial production of our devices, and we may face manufacturing capacity constraints.~~

We have limited history and experience in high-volume commercial production of our devices. For example, we launched our first high-volume products in March 2018. Because of this limited production history, we face challenges in predicting our businessidentifying and evaluating its prospects, which may result in breakdowns of our ability to timely supply our devices to our customers. Moreover, we face manufacturing capacity constraints that present further risks to our business. If overall demand of our devices increases in the future, we will need to expand our manufacturing capacity in a cost-efficient manner. Failing to meet customer demand due to our failure to successfully address these riskspotential strategic and ~~challenges could adversely impact our reputation and future sales, which would significantly harm our business, results of operations and financial condition.~~

~~Our ability to use our net operating losses to offset future taxable income will be subject to certain limitations.~~

As of December 31, 2018, we had U.S. federal and state net operating loss carryforwards, or NOLs, of $24.4 million and $9.6 million, respectively, due to prior period losses, a portion of which expire in various years beginning in 2035 and 2032, respectively, if not utilized. In general, under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its NOLs to offset future taxable income. Future changes in our stock ownership, some of which are outside of our control, could result in an ownership change. There is also a risk that due to regulatory changes, such as suspensions on the use of NOLs, or other unforeseen reasons, our existing NOLs could expire or otherwise be unavailable to offset future income tax liabilities. Under the Tax Cuts and Jobs Act, or the Tax Act, the amount of post 2017 NOLs that we are permitted to deduct from U.S. federal income taxes in any taxable year is limited to 80% of our taxable income in such year, where taxable income is determined without regard to the NOL deduction itself. The Tax Act generally eliminates the ability to carry back any NOL to prior taxable years, while allowing post 2017 unused NOLs to be carried forward indefinitely without expiration. Additionally, state NOLs generated in one state cannot be used to offset income generated in another state. For these reasons, we may not be able to realize a tax benefit from the use of our NOLs, whether or not we attain profitability.

~~The unfavorable outcome of any future litigation, arbitration or administrative action could have a significant adverse impact on our financial condition or results of operations.~~

From time to time we are a party to litigation, arbitration, or administrative actions. Our financial results and reputation could be negatively impacted by unfavorable outcomes to any future litigation or administrative actions,financing alternatives, including those related to ~~the Foreign Corrupt Practices Act, the U.K. Bribery Act, or other anti-corruption laws. There can be no assurances as to the favorable outcome of any litigation or administrative proceedings.~~equity compensation, severance pay and legal, accounting and financial advisory fees. In addition, ~~it can be very costly to defend litigation or administrative proceedings and these costs could negatively impact our financial results.~~

~~The nature of our business may result in undesirable press coverage or other negative publicity, which would adversely impact our brand identity, future sales and results of operations.~~

Our solutions are used to assist law enforcement and other public safety personnel in situations involving public safety. The incidents in which our solutions are deployed may involve injury, loss of life and other negative outcomes, and such events are likely to receive negative publicity. Such negative publicity could have an adverse impact on new sales or renewals or expansions of coverage areas by existing customers, which would adversely impact our financial results and business.

~~Changes in~~ the ~~availability of federal funding to support local public safety or other public sector efforts could impact our opportunities with public sector end customers.~~

Many of our public sector end customers rely to some extent on funds from the U.S. federal government in order to purchase and pay for our solutions. Any reduction in federal funding for local public safety or other public sector efforts could result in our end customers having less access to funds required to continue, renew, expand or pay for our solutions. For example, changes in policies with respect to “sanctuary cities” may result in a reduction in federal funds available to our current or potential end customers. Additionally, the recent U.S. government partial shutdown, and any future U.S. government shutdowns, could result in delayed public safety spending or re-allocation of funding into other areas of public safety. If federal funding is reduced or eliminated and our end customers cannot find alternative sources of funding to purchase our solutions, our business will be harmed.

Economic uncertainties or downturns, or political changes, could limit the availability of funds available to our customers and potential customers, which could significantly adversely impact our business.

Current or future economic uncertainties or downturns could adversely impact our business and operating results. Negative conditions in the general economy both in the United States and abroad, including conditions resulting from changes in gross domestic product growth, financial and credit market fluctuations, political deadlock, natural catastrophes, warfare and terrorist attacks in North America, Europe, the Asia Pacific region or elsewhere, could cause a decrease in funds available to our customers and potential customers and negatively affect the growth rate of our business.

These economic conditions may make it extremely difficult for our customers and us to forecast and plan future budgetary decisions or business activities accurately, and they could cause our customers to reevaluate their decisions to purchase our solutions, which could delay and lengthen our sales cycles or result in cancellations of planned purchases. Furthermore, during challenging economic times or as a result of political changes, our customers may tighten their budgets and face constraints in gaining timely access to sufficient funding or other credit, which could result in an impairment of their ability to make timely payments to us. In turn, weprocess may be ~~required~~time consuming and disruptive to ~~increase our allowance for doubtful accounts, which would adversely impact our financial results.~~

We cannot predict the timing, strength or duration of any economic slowdown, instability or recovery, generally or within any particular industry, or the impact of political changes. If the economic conditions of the general economy or industries in which we operate worsen from present levels, or if recent political changes result in less funding being available to purchase our solutions, our business, operating results and financial condition could be adversely impacted.

We are subject to anti-corruption, anti-bribery, anti-money laundering, economic sanctions, export control, and similar laws. Non-compliance with such laws can subject us to criminal or civil liability and harm our business, revenues, financial condition and results of operations.

We are subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, and other anti-bribery and anti-money laundering laws in the countries in which we conduct activities. Anti-corruption and anti-bribery laws have been enforced aggressively in recent years and are interpreted broadly to generally prohibit companies and their employees and third-party intermediaries from authorizing, offering, or providing, directly or indirectly, improper payments or benefits to recipients in the public or private sector. As we increase our international presence, we may engage with distributors and third-party intermediaries to market our solutions and to obtain necessary permits, licenses, and other regulatory approvals. In addition, we or our third-party intermediaries may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities. We can be held liable for the corrupt or other illegal activities of these third-party intermediaries, our employees, representatives, contractors, partners and agents, even if we do not explicitly authorize such activities.

The United States has imposed economic sanctions that affect transactions with designated foreign countries, nationals and others. In particular, the United States prohibits U.S. persons from engaging with individuals and entities identified as “Specially Designated Nationals,” such as terrorists and narcotics traffickers. These prohibitions are administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control, or OFAC. OFAC rules prohibit U.S. persons from engaging in, or facilitating a foreign person’s engagement in, transactions with or relating to the prohibited individual, entity or country, and require the blocking of assets in which the individual, entity or country has an interest. Blocked assets (e.g., property or bank deposits) cannot be paid out, withdrawn, set off or transferred in any manner without a license from OFAC. Other countries in which we operate, including Canada and the United Kingdom, also maintain economic and financial sanctions regimes.

Some of our solutions, including software updates and third-party accessories, may be subject to U.S. export control laws, including the Export Administration Regulations; however, the vast majority of our products are non-U.S.-origin items, developed and manufactured outside of the United States, and therefore not subject to these laws. For third-party accessories, we rely on manufactures to supply the appropriate export control classification numbers that determine our obligations under these laws.

We cannot assure you that our employees and agents will not take actions in violation of our policies and applicable law, for which we may be ultimately held responsible. As we increase our international presence, our risks under these laws, rules, and regulations may increase. Further, any change in the applicability or enforcement of these laws, rules, and regulations could adversely impact our business operations, could divert the attention of management and ~~financial results.~~

~~Detecting, investigating and resolving actual or alleged violations can require a significant diversion~~the board of ~~time, resources, and attention~~directors from senior management. In addition, noncompliance with anti-corruption, anti-bribery, anti-money laundering, or economic sanctions laws, rules, and regulations could subject us to whistleblower complaints, investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, suspension and/or debarment from contracting with certain persons, the loss of export privileges, reputational harm, adverse media coverage, and other collateral consequences. If any subpoenas or investigations are launched, or governmental or other sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, revenues, financial condition, and results of operations would be significantly harmed. In addition, responding to any action will likely result in a significant diversion of management’s attention and resources and significant defense costs and other professional fees. Enforcement actions and sanctions could further harm our business, financial condition and results of operations.

~~Foreign currency fluctuations may reduce our competitiveness and sales in foreign markets.~~

The relative change in currency values creates fluctuations in product pricing for international customers. These changes in foreign end-customer costs may result in lost orders and reduce the competitiveness of our products in certain foreign markets. These changes may also negatively impact the financial condition of some foreign customers and reduce or eliminate their future orders of our products.

~~We are subject to a wide range of product regulatory and safety, consumer, worker safety and environmental laws and regulations.~~

Our operations and the products we manufacture and/or sell are subject to a wide range of product regulatory and safety, consumer, worker safety and environmental laws and regulations. Compliance with such existing or future laws and regulations could subject us to future costs or liabilities, impact our production capabilities, constrict our ability to sell, expand or acquire facilities, restrict what solutions we can offer and generally impact our financial performance. Our products are designed for use in potentially explosive or hazardous environments. If our product design fails for any reason in such environments, we may be subject to product liabilities and future costs. In addition, some of these laws are environmental and relate to the use, disposal, remediation, emission and discharge of, and exposure to hazardous substances. These laws often impose liability and can require parties to fund remedial studies or actions regardless of fault. Environmental laws have tended to become more stringent over time and any new obligations under these laws could have a negative impact on our operations or financial performance.

Laws focused on the energy efficiency of electronic products and accessories, recycling of both electronic products and packaging, reducing or eliminating certain hazardous substances in electronic products, and the transportation of batteries continue to expand significantly. Laws pertaining to accessibility features of electronic products, standardization of connectors and power supplies, the transportation of lithium-ion batteries, and other aspects are also proliferating. There are also demanding and rapidly changing laws around the globe related to issues such as product safety, radio interference, radio frequency radiation exposure, medical related functionality, and consumer and social mandates pertaining to use of wireless or electronic equipment. These laws, and changes to these laws, could have a substantial impact on whether we can offer certain products, solutions, and services, and on what capabilities and characteristics our products or services can or must include.

~~These laws and regulations impact our products and~~ could negatively impact our ability to ~~manufacture~~attract, retain and sell products competitively. In addition, we anticipate that we will see increased demand to meet voluntary criteria related to reduction or elimination of certain constituents from products, increasing energy efficiencymotivate key employees, and ~~providing additional accessibility.~~

~~Changes in laws and regulations concerning the use of telecommunication bandwidth~~ could ~~increase our costs and adversely impact our business.~~

Our business depends on our ability to sell devices that use telecommunication bandwidth allocated to licensed and unlicensed wireless services, and that use of that bandwidth is subject to laws and regulations that are subject to change over time. Changes in the permitted uses of telecommunication bandwidth, reallocation of such bandwidth to different uses, and new or increased regulation of the capabilities, manufacture, importation, and use of devices that depend on such bandwidth could increase our costs, require costly modifications to our products before they are sold, or limit our ability to sell those products in to our target markets. In addition, we are subject to regulatory requirements for certification and testing of our products before they can be marketed or sold. Those requirements may be onerous and expensive. Changes to those requirements could result in significant additional costs and could adversely impact our ability to bring new products to market in a timely fashion.

Failure of our suppliers, subcontractors, distributors, resellers, and representatives to use acceptable legal or ethical business practices, or to fail for any other reason, could negatively impact our business.

We do not control the labor and other business practices of our suppliers, subcontractors, distributors, resellers and third-party sales representatives, or TPSRs, and cannot provide assurance that they will operate in compliance with applicable rules, and regulations regarding working conditions, employment practices, environmental compliance, anti-corruption, and trademark a copyright and patent licensing. If one of our suppliers, subcontractors, distributors, resellers, or TPSRs violates labor or other laws or implements labor or other business practices that are regarded as unethical, the shipment of finished products to us could be interrupted, orders could be canceled, relationships could be terminated, and our reputation could be damaged. If one of our suppliers or subcontractors fails to procure the necessary license rights to trademarks, copyrights or patents, legal action could be taken against us that could impact the saleability of our products and expose us to ~~financial obligations to~~potential litigation in connection with this process or any resulting transaction. The public announcement of a ~~third party. Any of these events could have~~strategic or financing alternative may also yield a negative impact on ~~our sales and results of operations.~~

Moreover, any failure of our suppliers, subcontractors, distributors, resellers and TPSRs, for any reason, including bankruptcy or other business disruption, could disrupt our supply or distribution efforts and could have a negative impact on our sales and results of operations.

~~Natural or man-made disasters and other similar events may significantly disrupt our business, and negatively impact our~~ operating results ~~and financial condition.~~

~~Any of our facilities may be harmed~~if prospective or rendered inoperable by natural or man-made disasters, including earthquakes, tornadoes, hurricanes, wildfires, floods, nuclear disasters, acts of terrorism or other criminal activities, infectious disease outbreaks, and power outages, which may render it difficult or impossible for usexisting customers are reluctant to operate our business for some period of time. For example, our corporate headquarters is located in the San Francisco Bay Area, a region known for seismic activity. Our facilities would likely be costlycommit to repair or replace, and any such efforts would likely require substantial time. Any disruptions in our operations could negatively impact our business and operating results, and harm our reputation. In addition, we may not carry business insurance or may not carry sufficient business insurance to compensate for losses that may occur. Any such losses or damages could have a significant adverse impact on our business, operating results and financial condition. In addition, the facilities of significant vendors may be harmed or rendered inoperable by such natural or man-made disasters, which may cause disruptions, difficulties or significant adverse impact on our business.

~~We are subject to a wide range of privacy and data security laws, regulations and other legal obligations.~~

Personal privacy and information security are significant issues in the United States and the other jurisdictions in which we operate or make our products and applications available. The legislative and regulatory framework for privacy and security issues worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future. Our handling of data is subject to a variety of laws and regulations, including regulation by various government agencies, including the U.S. Federal Trade Commission, or FTC, and various state, local and foreign agencies. We may collect personally identifiable information, or PII, and other data from our customers. We use this information to provide services to our customers and to support, expand and improve our business. We may also share customers’ PII with third parties as allowed by applicable law and agreements and authorized by the customer or as described in our privacy policy.

The U.S. federal and various state and foreign governments have adopted or proposed limitations on the collection, distribution, transfer, use and storage of PII. In the United States, the FTC and many state attorneys general are applying federal and state consumer protection laws as imposing standards for the online collection, use and dissemination of data. Many foreign countries and governmental bodies, including Canada, the European Union and other relevant jurisdictions, have laws and regulations concerning the collection and use of PII obtained from their residents or by businesses operating within their jurisdiction. These laws and regulations often are more restrictive than those in the United States. Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure and security of data that identifies or may be used to identify or locate an individual, such as names, email addresses and, in some jurisdictions, Internet Protocol, or IP, addresses. Within the European Union, legislators have adopted the General Data Protection Regulation, or GDPR, effective May 2018 which may impose additional obligations and risk upon our business and which may increase substantially the penalties to which we could be subject in the event of any non-compliance. We may incur substantial expense in complying with the obligations imposed by the governments of the foreign jurisdictions in which we do business or seek to do business and we may be required to make significant changes in our business operations, all of which may adversely impact our revenues and our business overall.

Although we are working to comply with those federal, state, and foreign laws and regulations, industry standards, contractual obligations and other legal obligations that apply to us, those laws, regulations, standards and obligations are evolving and may be modified, interpreted and applied in an inconsistent manner from one jurisdiction to another, and may conflict with one another, other requirements or legal obligations, our practices or the features of our products or applications. At state level, lawmakers continue to pass new laws concerning privacy and data security. Particularly notable in this regard is the California Consumer Privacy Act, or CCPA, which will become effective on January 1, 2020. The CCPA will introduce significant new disclosure obligations and provide California consumers with significant new privacy rights. Any failure or perceived failure by us to comply with federal, state or foreign laws or regulations, industry standards, contractual obligations or other legal obligations, or any actual or suspected security incident, whether or not resulting in unauthorized access to, or acquisition, release or transfer of PII or other data, may result in governmental enforcement actions and prosecutions, private litigation, fines and penalties or adverse publicity and could cause our customers to lose trust in us, which could have an adverse impact on our reputation and business. Any inability to adequately address privacy and security concerns, even if unfounded, or comply with applicable laws, regulations, policies, industry standards, contractual obligations, or other legal obligations could result in additional cost and liability to us, damage our reputation, inhibit sales and adversely impact our business.

We also expect that there will continue to be new proposed laws, regulations and industry standards concerning privacy, data protection and information security in the United States, the European Union and other jurisdictions, and we cannot yet determine the impact such future laws, regulations and standards may have on our business. New laws, amendments to or re-interpretations of existing laws and regulations, industry standards, contractual obligations and other obligations may require us to incur additional costs and restrict our business operations. Such laws and regulations may require companies to implement privacy and security policies, permit users to access, correct and delete personal information stored or maintained by such companies, inform individuals of security breaches that affect their personal information, and, in some cases, obtain individuals’ consent to use PII for certain purposes. In addition, a foreign government could require that any PII collected in a country not be disseminated outside of that country, and we are not currently equipped to comply with such a requirement.

~~We are exposed to risks associated with strategic acquisitions and investments.~~

We may consider strategic acquisitions of companies with complementary technologies or intellectual property in the future. Acquisitions hold special challenges in terms of successful integration of technologies, products, services and employees. We may not realize the anticipated benefits of these acquisitions or the benefits of any other acquisitions we have completed or may complete in the future, and we may not be able to incorporate any acquired services, products or technologies with our existing operations, or integrate personnel from the acquired businesses, in which case our business could be harmed.

~~Acquisitions and other strategic decisions involve numerous risks, including:~~

~~Financing for~~ future acquisitions may not be available on favorable terms, or at all. If we identify an appropriate acquisition candidate for any of our businesses, we may not be able to negotiate the terms of the acquisition successfully, finance the acquisition or integrate the acquired business, products, service offerings, technologies or employees into our existing business and operations. Future acquisitions and divestitures may not be well-received by the investment community, which may cause the value of our stock to fall. We cannot ensure that we will be able to identify or complete any acquisition, divestiture or discontinued business in the future. Further, the terms of our indebtedness constrain our ability to make and finance additional acquisitions or divestitures.

If we acquire businesses, new products, service offerings or technologies in the future, we may incur significant acquisition-related costs. In addition, we may be required to amortize significant amounts of finite-lived intangible assets and we may record significant amounts of goodwill or indefinite-lived intangible assets that would be subject to testing for impairment. We have in the past and may in the future be required to write off all or part of the intangible assets or goodwill associated with these investments that could harm our operating results. If we consummate one or more significant future acquisitions in which the consideration consists of stock or other securities, our existing stockholders’ ownership could be significantly diluted. If we were to proceed with one or more significant future acquisitions in which the consideration included cash, we could be required to use a substantial portion of our cash and investments. Acquisitions could also cause operating margins to fall depending on the businesses acquired.

Our strategic investments may involve joint development, joint marketing, or entry into new business ventures, or new technology licensing. Any joint development efforts may not result in the successful introduction of any new products or ~~services by us~~if existing customers decide to shift their business to a competitor. Further, speculation regarding any developments related to the review of strategic or ~~a third party,~~financial alternatives and ~~any joint marketing efforts may not result in increased demand for our products or services. Further, any current or~~perceived uncertainties related to the future strategic acquisitions and investments by us may not allow us to enter and compete effectively in new markets or enhance our business in our existing markets and we may have to impair the carrying amount of our investments.

~~The effects~~ of the ~~Tax Cuts and Jobs Act on our business have not yet been fully analyzed and could harm our results of operations~~.

On December 22, 2017, U.S. President Donald Trump signed into law the Tax Act that significantly reforms the Code. The Tax Act, among other things, includes changes to U.S. federal corporate income tax rate, imposes significant additional limitations on the deductibility of interest, allows for the accelerated expensing of capital expenditures, and puts into effect the migration from a “worldwide” system of taxation to a territorial system. We continue to analyze the impact that the Tax Act may have on our business. Notwithstanding the reduction in the U.S federal corporate income tax rate, the overall impact of the Tax Act is uncertain, and our business and financial condition could be harmed.

~~We could be adversely impacted by changes in accounting standards and subjective assumptions, estimates and judgments by management related to complex accounting matters.~~

Generally accepted accounting principles and related accounting pronouncements, implementation guidelines, and interpretations with regard to a wide range of matters that are relevant to our businesses, including, but not limited to, revenue recognition, asset impairment, inventories, customer rebates and other customer consideration, tax matters, and litigation and other contingent liabilities are highly complex and involve many subjective assumptions, estimates and judgments. Changes in these rules or their interpretation or changes in underlying assumptions, estimates or judgments could significantly change our reported or expected financial performance or financial condition. New accounting guidance may also require systems and other changes that could increase our operating costs and/or change our financial statements. For example, implementing future accounting guidance related to revenue, accounting for leases and other areas could require us to make significant changes to our accounting systems, impact existing debt agreements and result in adverse changes to our financial statements.

~~If we are unable to successfully protect our intellectual property, our competitive position may be harmed.~~

Our ability to compete is heavily affected by our ability to protect our intellectual property. We rely on a combination of patents, patent applications, copyright and trademark laws, trade secrets, confidentiality procedures and contractual provisions to protect our proprietary rights. We also enter, and plan to continue to enter, into confidentiality, invention assignment or license agreements with our employees, consultants and other parties with whom we contract, and control access to and distribution of our software, documentation and other proprietary information. The steps we take to protect our intellectual property may be inadequate, and it is possible that some or all of our confidentiality agreements will not be honored and certain contractual provisions may not be enforceable. Existing trade secret, trademark and copyright laws offer only limited protection. Unauthorized parties may attempt to copy aspects of our products or obtain and use information which we regard as proprietary. Policing unauthorized use of our products is difficult, time consuming and costly, particularly in foreign countries where the laws may not protect our proprietary rights as fully as in the United States. We cannot assure you that our means of protecting our proprietary rights will be adequate or that our competitors will not independently develop similar technology, the effect of either of which would harm our competitive position in the market. Furthermore, disputes can arise with our strategic partners, customers or others concerning the ownership of intellectual property.

Others may claim that we infringe on their intellectual property rights, which may result in costly and time-consuming litigation and could delay or otherwise impair the development and commercialization of our products.

In recent years, there has been a significant increase in litigation in the United States involving patents and other intellectual property rights, and because our products are comprised of complex technology, we are often involved in or impacted by assertions, including both requests to take licenses and litigation, regarding infringement of patent and other intellectual property rights of third parties. Third parties have asserted, and in the future may assert, intellectual property infringement claims against us and against our channel partners, end customers and suppliers. Many of these assertions are brought by non-practicing entities whose principal business model is to secure patent licensing revenues from product manufacturing companies. Claims for alleged infringement and any resulting lawsuit, if successful, could subject us to significant liability for damages and invalidation of our intellectual property rights. Defending any such claims, with or without merit, including pursuant to indemnity obligations, could be time consuming, expensive, cause product shipment delays or require us to enter into a royalty or licensing agreement, any of which could delay the development and commercialization of our products or reduce our margins. If we are unable to obtain a required license, our ability to sell or use certain products may be impaired. In addition, if we fail to obtain a license, or if the terms of the license are burdensome to us, our operations could be significantly harmed.

~~Our use of open source software could subject us to possible litigation or otherwise impair the development of our products.~~

A portion of our technologies incorporates open source software, including open source operating systems such as Android, and we expect to continue to incorporate open source software into our platform in the future. Few of the licenses applicable to open source software have been interpreted by courts, and their application to the open source software integrated into our proprietary technology platform may be uncertain. If we fail to comply with these licenses, then pursuant to the terms of these licenses, we may be subject to certain requirements, including requirements that we make available the source code for our software that incorporates the open source software. We cannot assure you that we have not incorporated open source software in our software in a manner that is inconsistent with the terms of the applicable licenses or our current policies and procedures. If an author or other third party that distributes such open source software were to allege that we had not complied with the conditions of one or more of these licenses, we could incur significant legal expenses defending against such allegations. Litigation could be costly for us to defend, have a negative effect on our operating results and financial condition or require us to devote additional research and development resources to change our technology platform.

With respect to open source operating systems, if third parties cease continued development of such operating systems or restrict our access to such operating system, our business and financial results could be adversely impacted. We are dependent on third parties’ continued development of operating systems, software application ecosystem infrastructures, and such third parties’ approval of our implementations of their operating and system and associated applications. If such parties cease to continue development or support of such operating systems or restrict our access to such operating systems, we would be required to change our strategy for our devices. As a result, our financial results could be negatively impacted because a resulting shift away from the operating systems we currently use and the associated applications ecosystem could be costly and difficult.

~~Our inability to obtain and maintain any third-party license required to develop new products and product enhancements could seriously harm our business, financial condition and results of operations.~~

From time to time, we are required to license technology from third parties to develop new products or product enhancements. For example, we have entered into worldwide intellectual property cross license agreements or other technology license agreements with a number of global technology companies in the mobile telecommunications market. Third-party licenses may not be available to us on commercially reasonable terms, or at all. If we fail to renew any intellectual property license agreements on commercially reasonable terms, or any such license agreements otherwise expire or terminate, we may not be able to use the patents and technologies of these third parties in our products, which are critical to our success. We cannot assure you that we will be able to effectively control the level of licensing and royalty fees paid to third parties, and significant increase in such fees could have a significant and adverse impact on our future profitability. Seeking alternative patents and technologies may be difficult and time-consuming, and we may not be successful in finding alternative technologies or incorporating them into our products. Our inability to obtain any third-party license necessary to develop new products or product enhancements could require us to obtain substitute technology of lower quality or performance standards, or at greater cost, which could seriously harm our business, financial condition and results of operations.

~~The market price of our common stock is likely to be volatile and could fluctuate or decline, resulting in substantial loss of your investment.~~

The market price of our common stock could be subject to wide fluctuations in response to, among other things, the factors described in this “Risk factors” section or otherwise, and other factors beyond our control, such as fluctuations in the valuations of companies perceived by investors to be comparable to us.

Furthermore, the stock markets have experienced price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market fluctuations, as well as general economic, systemic, political and market conditions, such as recessions, interest rate changes or international currency fluctuations, may negatively affect the market price of our common stock.

~~The trading price of our common stock is likely to be volatile and subject to wide price fluctuations in response to various factors, including:~~

These and other factors may cause the market price and demand for our common stock to fluctuate substantially, which may limit or prevent investors from readily selling their shares of common stock and may otherwise negatively affect the liquidity of our common stock. In addition, in the past, when the market price of a stock has been volatile, holders of that stock have often instituted securities class action litigation against the company that issued the stock. If any of our stockholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit. Such a lawsuit could also divert the time and attention of our management from our business.

Our executive officers and directors, and their affiliated entities, along with our two other largest stockholders, own a significant percentage of our stock and are able to exert significant control over matters subject to stockholder approval.

Our executive officers and directors, together with entities affiliated with such individuals, along with our five other largest stockholders, will beneficially own a majority of our common stock as of immediately following the consummation of our IPO. Accordingly, these stockholders may, as a practical matter, continue to be able to control the election of a majority of our directors and the determination of all corporate actions after this offering. This concentration of ownership could delay or prevent a change in control of the Company.

~~Sales of a substantial number of shares of our common stock in the public market, or the perception these sales might occur,~~Company could cause our stock price to ~~decline~~

The market price of our common stock could decrease significantly as a result of sales of a large number of shares of our common stock in the public market, and the perception that these sales could occur may also depress the market price of our common stock. Our directors, executive officers and other holders of our common stock are subject to lock-up agreements with the underwriters of our IPO under which they have agreed, subject to specific exceptions, not to sell any of our stock for 180 days following the date of our Prospectus. Following the expiration of such lock-up agreements, certain stockholders will be entitled, under our investors’ rights agreement, to require us to register shares owned by them for public sale in the United States. In addition, we filed a registration statement to register shares issued under our equity compensation plans. As a result, subject to the satisfaction of applicable exercise periods and the expiration or waiver of the lock-up agreements referred to above, the shares issued upon exercise of outstanding stock options or upon settlement of outstanding RSU awards will be available for immediate resale in the United States in the open market.

The market price of shares of our common stock may drop significantly when the restrictions on resale by our existing stockholders lapse or upon registration of our common stock. A decline in the price of shares of our common stock might impede our ability to raise capital through the issuance of additional shares of our common stock or other equity securities.

~~Since we do not expect to pay any cash dividends for the foreseeable future, investors may be forced to sell their stock in order to obtain a return on their investment.~~

We do not anticipate declaring or paying in the foreseeable future any cash dividends on our capital stock. Instead, we plan to retain any earnings to finance our operations and growth plans discussed elsewhere or incorporated by reference in this Quarterly Report on Form 10-Q. Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any return on their investment. As a result, investors seeking cash dividends should not purchase our common stock.

If securities or industry analysts do not publish research or reports about our business, or if they change their recommendations regarding our stock adversely, our stock price and trading volume could decline.

The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. If one or more of the analysts who cover us downgrade our stock or describe us or our business in a negative manner, our stock price would likely decline. If one or more of these analysts cease coverage of our company or fails to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.

If we fail to maintain proper and effective internal controls or are unable to remediate any deficiencies or weaknesses in our internal controls, our ability to produce accurate financial statements on a timely basis could be impaired.

We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, and the rules and regulations of Nasdaq. Section 302 of the Sarbanes-Oxley Act requires, among other things, that we report on the effectiveness of our disclosure controls and procedures in our quarterly and annual reports and, beginning with our annual report for the year ending 2020, Section 404 of the Sarbanes-Oxley Act requires that we perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on the effectiveness of our internal control over financial reporting in our Form 10-K filing for that year. This will require that we incur substantial additional professional fees and internal costs to expand our accounting and finance functions and that we expend significant management efforts. Prior to IPO, we have never been required to test our internal control within a specified period, and, as a result, we may experience difficulty in meeting these reporting requirements in a timely manner.

As a public company, we will be required to maintain internal control over financial reporting and to report any material weaknesses in those internal controls. With respect to the year ended December 31, 2018, we identified two material weaknesses in our internal controls over financial reporting related to accounting for revenue recognition and inventory reporting. Although we are making efforts to remediate these issues, these efforts may not be sufficient to avoid similar material weaknesses in the future.fluctuate significantly.

If the material weakness in our internal controls is not fully remediated or if additional material weaknesses are identified, those material weaknesses could cause us to fail to meet our future reporting obligations, reduce the market’s confidence in our financial statements, harm our stock price and subject us to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities. In addition, our common stock may not be able to remain listed on Nasdaq or any other securities exchange. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected.

~~We are an “emerging growth company” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.~~

We are an “emerging growth company” as defined in the JOBS Act, and we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. We cannot predict whether investors will find our common stock less attractive if we rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

The requirements of being a public company may strain our resources and distract our management, which could make it difficult to manage our business, particularly after we are no longer an “emerging growth company.”

We are required to comply with various regulatory and reporting requirements, including those required by the SEC. Complying with these reporting and other regulatory requirements will be time-consuming and will result in increased costs to us and could have a negative effect on our results of operations, financial condition or business.

As a public company, we are subject to the reporting requirements of the Exchange Act and requirements of the Sarbanes-Oxley Act. These requirements may place a strain on our systems and resources. The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal controls over financial reporting. To maintain and improve the effectiveness of our disclosure controls and procedures, we will need to commit significant resources, hire additional staff and provide additional management oversight. We will be implementing additional procedures and processes for the purpose of addressing the standards and requirements applicable to public companies. Sustaining our growth also will require us to commit additional management, operational and financial resources to identify new professionals to join our firm and to maintain appropriate operational and financial systems to adequately support expansion. These activities may divert management’s attention from other business concerns, which could have a significant adverse impact on our results of operations, financial condition or business.

As an “emerging growth company” as defined in the JOBS Act, we intend to take advantage of certain temporary exemptions from various reporting requirements including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. In addition, we have elected under the JOBS Act to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

When these exemptions cease to apply, we expect to incur additional expenses and devote increased management effort toward ensuring compliance with them. We cannot predict or estimate the amount of additional costs we may incur as a result of becoming a public company or the timing of such costs.

Some provisions of Delaware law and our certificate of incorporation and bylaws may delay or prevent a change in control, and may discourage bids for our common stock at a premium over its market price.

~~Our certificate of incorporation and bylaws provide for, among other things:~~

These anti-takeover defenses could discourage, delay or prevent a transaction involving a change in control of our company. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing and cause us to take other corporate actions than you desire.

Additionally, we are subject to the provisions of Section 203 of the Delaware General Corporation Law, or the DGCL. These provisions prohibit large stockholders, in particular a stockholder owning 15% or more of the outstanding voting stock, from consummating a merger or combination with a corporation unless this stockholder receives board approval for the transaction or 66 2/3% of the shares of voting stock not owned by the stockholder approve the merger or transaction. These provisions of Delaware law may have the effect of delaying, deferring or preventing a change in control, and may discourage bids for our common stock at a premium over its market price.

Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or agents.

Our amended and restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will, to the fullest extent permitted by applicable law, be the sole and exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, employees, agents or trustees to us or our stockholders, (iii) any action asserting a claim against us or any director or officer or other employee of ours arising pursuant to any provision of the DGCL, our amended and restated certificate of incorporation or our bylaws or (iv) any action asserting a claim against us or any director or officer or other employee of ours that is governed by the internal affairs doctrine, in each such case subject to such Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock will be deemed to have notice of, and consented to, the provisions of our amended and restated certificate of incorporation described in the preceding sentence. Under our amended and restated certificate of incorporation, this exclusive forum provision will not apply to claims which are vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery of the State of Delaware, or for which the Court of Chancery of the State of Delaware does not have subject matter jurisdiction. For instance, the provision would not apply to actions arising under federal securities laws, including suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder, jurisdiction over which is exclusively vested by statute in the U.S. federal courts. This exclusive choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, employees or agents, which may discourage such lawsuits against us and such persons. If a court were to find the choice of forum provisions contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could have a significant impact on our business, financial condition and results of operations.

Our amended and restated certificate of incorporation designates the U.S. federal district courts as the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. We may be unable to enforce these provisions.

Our amended and restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States shall, to the fullest extent permitted by law, be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. Accordingly, there is uncertainty as to whether a court would enforce such provision. The Court of Chancery of the State of Delaware recently determined that the exclusive forum provision of federal district courts of the United States of America for resolving any complaint asserting a cause of action arising under the Securities Act is not enforceable. However, this decision may be reviewed and ultimately overturned by the Delaware Supreme Court. If this ultimate adjudication were to occur, we would seek to enforce the federal district court exclusive forum provision in our amended and restated certificate of incorporation, which would result in additional costs and divert management. If we face relevant litigation and are unable to enforce these provisions, we may incur additional costs associated with resolving such matters in other jurisdictions, which could harm our business, financial condition, or results of operations.

Our future quarterly results of operations may fluctuate significantly due to a wide range of factors, including reliance on our carrier distribution channels, significant competition and seasonality in our business, which makes our future results difficult to predict.

~~Our revenues and results of operations could vary significantly from quarter to quarter as a result of various factors, many of which are outside of our control, including:~~

Any one of these or other factors discussed elsewhere in this Quarterly Report on Form 10-Q may result in fluctuations in our revenues and operating results, meaning that quarter-to-quarter comparisons of our revenues, results of operations and cash flows may not necessarily be indicative of our future performance.

In addition, we have experienced, and expect to continue to experience, first quarter seasonality due, among other things, to customer capital spending patterns and the timing of our planned expenses. Such seasonality could have a significant adverse impact on our results of operations, particularly for our quarters ending March 31.

Because of the fluctuations described above, our ability to forecast revenues is limited and we may not be able to accurately predict our future revenues or results of operations. In addition, we base our current and future expense levels on our operating plans and sales forecasts, and our operating expenses are expected to be relatively fixed in the short term. Accordingly, we may not be able to reduce our costs sufficiently to compensate for an unexpected shortfall in revenues, and even a small shortfall in revenues could disproportionately and adversely impact our financial results for that quarter. The variability and unpredictability of these and other factors could result in our failing to meet or exceed financial expectations for a given period.

~~From January 1, 2019 to March 31, 2019, 54,720 shares of common stock were issued upon the exercised of outstanding options at a weighted average exercise price of $0.75 per share.~~

None of the foregoing transactions involved any underwriters, underwriting discounts or commissions, or any public offering. Unless otherwise specified above, we believe that the transactions described above were exempt from registration under the Securities Act in reliance on Rule 701 promulgated under Section 3(b) of the Securities Act as transactions by an issuer not involving any public offering or under benefit plans and contracts relating to compensation as provided under Rule 701. The recipients of the securities in each of these transactions represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were placed on the share certificates issued in these transactions. All recipients had adequate access, through their relationships with us, to information about us. The sales of these securities were made without any general solicitation or advertising.

On May 14, 2019, we closed our IPO in which we sold 3,571,429 shares of our common stock at a price of $11.00 per share. On May 22, 2019, we sold an additional 505,714 shares of common stock, and our selling stockholder sold 30,000 shares of common stock, at a price to the public of $11.00 per share pursuant to the exercise of the underwriters’ option to purchase additional shares. ~~The~~ offer and sale of the shares in the IPO were registered under the Securities Act pursuant to a registration statement on Form S-1 (File No. 333-230887), which was declared effective by the SEC on May 9, 2019. We raised approximately $37.6 million in net proceeds after deducting underwriting discounts and commissions of $3.1 million and offering expenses paid by us of approximately $4.1 million.

We intend to use the net proceeds of our IPO for general corporate purposes, including working capital, expanded sales and marketing activities, increased research and development expenditures and funding our growth strategies. We may also use a portion of the net proceeds from the offering to prepay the outstanding principal amount and accrued interest under ~~the subordinated secured convertible promissory note issued to B. Riley Principal Investments, LLC~~ in a principal amount of $12 million, including prepayment penalties. We used a portion of the net proceeds to satisfy tax withholding and remittance obligations related to the restricted stock award granted to our chief executive officer immediately following the closing of the IPO, or the RSA Settlement The representatives of the underwriters for our IPO were Oppenheimer & Co. Inc. and Lake Street Capital Markets, LLC. With the exception of the RSA Settlement, no payments were made by us to directors, officers or persons owning ten percent or more of our common stock or to their associates, or to our affiliates, other than payments in the ordinary course of business to officers for salaries and to non-employee directors pursuant to our director compensation policy.

* The certifications furnished in Exhibits 32.1 and 32.2 that accompany this Quarterly Report on Form 10-Q are deemed furnished and not filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of ~~Convertible Preferred Stock and Stockholders~~Stockholder’s Equity ~~(Deficit)~~	3
	Condensed Consolidated Statements of Cash Flows	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1816
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2427
Item 4.	Controls and Procedures	2427
PART II.	OTHER INFORMATION	26
Item 1.	Legal Proceedings	2628
Item 1A.	Risk Factors	2628
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4631
Item 3.	Defaults Upon Senior Securities	4731
Item 4.	Mine Safety Disclosures	4731
Item 5.	Other Information	4731
Item 6.	Exhibits	4832
Signatures		5033

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Smartphones	$	2,800	$	5,684	$	11,115	$	18,040
Feature Phones		11,396		8,323		25,735		28,059
Scanners		3	—			1,094	—
Accessories/Other		246		386	695			2,058
	$	14,445	$	14,393	$	38,639	$	48,157

	Contractual
	Liability
Balance at, January 1, 2021	$	5
Recognition of revenue		(880	)
Addition to deferred revenue		875
Balance at, September 30, 2021	$	—

	March 31, 2019		December 31, 2018
Devices - for resale	$	18,280	$	11,319
Work in process		1,334		—
Raw materials		7,538		8,826
Accessories		1,911		1,686
	$	29,063	$	21,831

Balance, January 1, 2019	$	1,103
Balance, January 1, 2021				$	1,530
Additions		442			880
Cost of warranty claims		(352	)		(1,114	)
Balance, March 31, 2019	$	1,193
Balance, September 30, 2021				$	1,296

Balance, January 1, 2018	$	1,742
Balance, January 1, 2020				$	1,154
Additions		121			1,269
Cost of warranty claims		(372	)		(1,187	)
Balance, March 31, 2018	$	1,491
Balance, September 30, 2020				$	1,236

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☒

	2019			2018
Net revenues	$	26,484		$	18,190
Cost of revenues		17,105			12,927
Gross profit		9,379			5,263
Operating expenses:
Research and development		8,401			5,141
Sales and marketing		3,726			2,543
General and administrative		2,476			1,593
Total operating expenses		14,603			9,277
Loss from operations		(5,224	)		(4,014	)
Interest expense		(422	)		(406	)
Other expense, net		(265	)		(117	)
Loss before income taxes		(5,911	)		(4,537	)
Income tax expense		(295	)		(534	)
Net loss		(6,206	)		(5,071	)
Cumulative dividends on Series A, Series A-1 and Series A-2 preferred shares		—			(2,967	)
Net loss attributable to common stockholders	$	(6,206	)	$	(8,038	)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.39	)	$	(7.77	)
Weighted–average shares used in computing net loss per share attributable to common stockholders, basic and diluted		15,783,744			1,034,641

	Series A convertible				Series A-1 convertible				Series A-2 convertible				Series B convertible								Additional					Total
	preferred stock				preferred stock				preferred stock				preferred stock				Common stock				paid-in		Accumulated			stockholders'
	Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount		capital		deficit			equity (deficit)
Balance at January 1, 2019		—		—		—		—		—		—		—		—		15,591,357	$	15	$	148,641	$	(143,527	)	$	5,129
Issuance of common stock, net of issuance costs		—		—		—		—		—		—		—		—		227,628		1		1,603		—			1,604
Issuance of common stock upon exercise of stock options		—		—		—		—		—		—		—		—		54,720		—		41		—			41
Employee and nonemployee stock-based compensation		—		—		—		—		—		—		—		—		—		—		47		—			47
Net loss		—		—		—		—		—		—		—		—		—		—		—		(6,206	)		(6,206	)
Balance at March 31, 2019		—		—		—		—		—		—		—		—		15,873,705	$	16	$	150,332	$	(149,733	)	$	615

Balance at January 1, 2018		7,471,765	$	44,564		1,586,024	$	4,487		1,183,703	$	9,733		1,665,291	$	21,613		1,027,113	$	1	$	54,892	$	(144,804	)	$	(89,911	)
Issuance of common stock upon exercise of stock options		—		—		—		—		—		—		—		—		8,457		—		11		—			11
Employee and nonemployee stock-based compensation		—		—		—		—		—		—		—		—		—		—		33		—			33
Net loss																								(5,071	)		(5,071	)
Balance at March 31, 2018		7,471,765	$	44,564		1,586,024	$	4,487		1,183,703	$	9,733		1,665,291	$	21,613		1,035,570	$	1	$	54,936	$	(149,875	)	$	(94,938	)

	Three Months Ended September 30,		Nine Months Ended September 30,
	2021	2020	2021	2020
Customer A	21%	11%	27%	*
Customer B	23%	28%	24%	40%
Customer C	28%	11%	13%	11%
Customer D	*	13%	*	10%

	March 31, 2019								September 30, 2021
	Level 1		Level 2		Level 3		Total		Level 1		Level 2			Level 3			Total
Assets:
Money market funds *	$	5,360	$	—	$	—	$	5,360	$	1,500	$	—		$		—	$			1,500

Liabilities:
Trade-in Guarantee	$	—	$	—	$	—	$	—
									December 31, 2020
									Level 1			Level 2	Level 3					Total
Assets:
Money market funds *									$	17,905	$	—	$		—			$	17,905

	Warrant		Trade-In
	liability		Guarantee
Balance at January 1, 2019	$	—	$	268
Recognition of revenue		—		(268	)
Balance at March 31, 2019	$	—	$	—

Balance at January 1, 2018	$	3,785	$	805
New instrument		—		—
Recognition of revenue		—		—
Change in fair value		242		—
Balance at March 31, 2018	$	4,027	$	805

Year Ending, December 31^st,
2019	$	148
2020		224
2021		144
2022		13,145
2023		143
	$	13,804

			Number of
	Exercise		warrant		Year of
Issuance date	price		shares		expiration
Common
November 2012	$	6.00		7	2028
November 2012	$	6.00		927	2020
November 2012	$	14.50		22	2028
August 2016	$	0.15		155,338	2023
Total warrants				156,294

					Weighted average
				Weighted average	remaining		Aggregate
				exercise price	contractual life		Intrinsic
	Options			per share	(in years)		Value*
Outstanding at January 1, 2021	144,303		$	36.37	7.82	$	24
Options granted	—		$	—
Options exercised	(707	)	$	7.50
Options forfeited	(23,171	)	$	27.55
Options expired	(13,781	)	$	32.29
Outstanding at September 30, 2021	106,644		$	39.00	6.35	$	9


Exercisable at September 30, 2021	69,082		$	42.34	5.36	$	9

	RSUs
Outstanding at January 1, 2021		269,138
Granted		47,597
Released		(55,683	)
Forfeited		(84,175	)
Outstanding atSeptember 30, 2021		176,877

Exercisable September 30, 2021		—

	March 31, 2019		March 31, 2018
Research and development	$	4	$	5
Sales and marketing		11	8
General and administrative		31	15
Cost of revenues		1	5
	$	47	$	33

	2019	2018
Shares of convertible preferred stock	—	11,906,783
Shares subject to options to purchase common stock	1,261,946	1,088,221
Shares subject to warrants to purchase convertible preferred stock	—	472,947
Shares subject to warrants to purchase common stock	156,294	—
Shares subject to term debt optional conversion into convertible preferred stock	—	1,163,764
Shares subject to term debt optional conversion into common stock	1,099,278	—
Total	2,517,518	14,631,715

	2019		2018
Product Sales	$	26,332	$	16,967
Services		152		1,223
Total revenues	$	26,484	$	18,190

Balance, January 1, 2020	$	511
Additions: expensed costs		1,204
Expenses paid out		(1,715	)
Balance, September 30, 2020	$	—

	•	There is substantial doubt about our ability to continue as a going concern and we may not be able to improve our liquidity or financial position;

	•	We may not be able to continue to develop solutions to address user needs effectively, including our next generation products, which would materially adversely affect our liquidity and our ability to continue operations;

	•	We have not been profitable in recent years and may not achieve or maintain profitability in the future;

	Three Months Ended March 31,
	2019			2018
	(in thousands)
Smartphones		25			22
Feature Phones		47			17
Total Units Sold		72			39
Adjusted EBITDA	$	(4,908	)	$	(3,631	)

	Three Months Ended March 31
	2019			2018
Net Loss	$	(6,206	)	$	(5,071	)
Adjustments:
Depreciation and Amortization		534			467
Stock Based Compensation Expense		47			33
Interest Expense		422			406
Income taxes		295			534
Adjusted EBITDA		(4,908	)		(3,631	)
Exchange Rate		265			117
Adjusted Covenant EBITDA	$	(4,643	)	$	(3,514	)


~~101.LAB~~*		~~XBRL Taxonomy Extension Label Linkbase Document.~~

~~101PRE~~		~~XBRL Taxonomy Extension Presentation Linkbase Document.~~


	~~Company Name~~SONIM TECHNOLOGIES, INC.

Date: ~~June 24, 2019~~November 10, 2021	By:	/s/ Robert ~~Plaschke~~Tirva
		Robert ~~Plaschke~~Tirva
		~~Chief Executive Officer~~

~~Date: June 24, 2019~~	~~By:~~	~~/s/ James Walker~~
		~~James Walker~~
		President, Chief Financial Officer and Chief Operating Officer (Principal Executive Officer, Duly Authorized Officer, Principal Financial Officer)